Key Takeaway
Corporate bonds in India yield 1.5–4% more than government securities depending on credit rating. AAA-rated corporate bonds offer 8–9% yield, while AA-rated bonds offer 9–11% with higher default risk.
980
8.5%
5 Years
True Yield (YTM)8.99%
Annual Coupon Interest85
Maturity Capital Gain20
Yield Analysis:
- Coupon Interest (coupon paid annually): ₹85.
- Total interest payouts over 5 Years: ₹425.
- Buying at a Discount yields an effective annualized return of 8.99% (YTM).
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Frequently Asked Questions
What is Yield to Maturity (YTM)?
YTM is the total annualized return expected on a bond if it is purchased at current market price and held until it reaches maturity.
How does purchase price affect bond yield?
If you buy a bond at a discount (below face value), your YTM will be higher than the coupon rate. If you buy at a premium, your YTM will be lower.
What is default risk in corporate bonds?
Default risk is the chance that the issuing company fails to pay interest or principal on time. Check credit ratings (AAA, AA, etc.) before investing.
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