Post #229 by bacon on the Index Investing board

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- Manlobbi

Investment Strategies / Index Investing

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If I buy a $100 face value bond with a 3% coupon at $50, then for me it pays 6% every year.

The percentage yield is not the money you're getting. You're getting $3 every year, regardless of the yield. Yield to Maturity only tells you how much cash you'll collect from purchase to maturity and relates that sum to the opportunity cost or gain from buying this bond vs any other instrument or just sitting on the cash.

Eric Hines

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