Buying a 100,000 yen bond keeps the capital sum safe while also providing regular payments to the saver. To be precise, the bond pays a fixed rate or 'coupon' of 1.5 per cent: 1,500 yen a year in the case of a 100,000 yen bond. But the market interest rate or current yield is calculated by dividing the coupon by the market price, which is currently 102,333 yen: 1,500 ÷ 102,333 = 1.47 per cent.
A 100,000 yen bond offers safety for the investment while delivering consistent income through regular payments. Specifically, it provides a fixed annual coupon of 1.5 percent, which translates to yearly payments of 1,500 yen for the bondholder. This ensures that the initial investment remains protected as the bond matures.
However, when considering the bond's market performance, the current yield is determined by dividing the annual coupon payment by the market price of the bond. With the bond priced at 102,333 yen, the yield calculates to approximately 1.47 percent, indicating a slight variation from the fixed coupon rate. This reflects how market conditions can influence the returns on fixed-income investments.
