Bond yield explained
Understand why coupon rate is fixed at issuance.
In this lesson
Bond yield explained is part of Stocks and Bonds Basics. This preview shows how investment-universe connects to everyday family decisions such as earning, saving, spending choices, goals, approvals, or parent-guided money conversations inside Progress Penguin.
Today’s money mission
Imagine this situation: You buy a bond with 100000 in local currency face value and a 12% coupon for 90000 in local currency (below face value).
What you need to know
Coupon rate is fixed at issuance. Yield changes with price. Buy at face value: yield = coupon. Buy below face value: yield > coupon (you earn the same income on less outlay). Buy above face value: yield < coupon. Yield to maturity accounts for all cash flows — the most complete measure.
Real-life example
Real-life money moment: You buy a bond with 100000 in local currency face value and a 12% coupon for 90000 in local currency (below face value). What is your effective yield? The key lesson is: When you buy a bond below face value, your actual yield (return on money invested) exceeds the coupon rate.
Progress Penguin connection
Open the investment simulator and buy a bond at a 5% discount to face value. Calculate the yield to maturity — it will be higher than the coupon rate. Now buy the same bond at a 5% premium. The yield to maturity will be lower. Price and yield move in opposite directions.
Activity preview
Try the money challenge
Run the investment model and test: coupon rate is fixed at issuance. Adjust one variable — time, rate, or amount — and note which has the biggest effect on the final balance.
Try one real money action
Open Tasks and submit proof for one task, or open Requests and make a deposit request. Parent approval can happen later.
Quiz preview
Bond 'yield' means:
You buy a bond with 100000 in local currency face value and a 12% coupon for 90000 in local currency (below face value). What is your effective yield?