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.
Think about this money choice
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).
How it works
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.
Apply it to a real decision
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.
Activity preview
Connect the ideas
Use the lesson to complete this short practice activity.
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?