 Coupon rate- interest rate › Fixed annual payment › Interest rate changes  Current yield- › interest payment as a percentage of the bond’s current market price.

$ amount of interest payment divided by New market coupon rate ($90/.10=$900 value) $ amount interest payment divided by Market price X 100 ($80/$900X100= 8.9% yield) Coupon rate and change of IR To find current yield

 Don’t buy when IR are low or rising  Short-intermediate length have less volatility  Diversify maturity dates  Bond mutual fund?

 Standard and Poor’s--- Moody’s  AAA=best  Anything below BBB or Baa= junk bond  Lower the rating the higher the yield

 Compare the price and yield to identical ratings  Poison put- protects against takeovers

 Redeemable for a number of shares in a company  Falling Interest rates › Bad for stocks, good for bonds › Somewhat balances out  Not supported by company assets  Paid after other bonds  Callable and lower yield