Coupon rate

The coupon rate is the fixed interest rate stated on the bond, applied to its face value. A 10-year bond with a 12% coupon and a TZS 1,000,000 face value pays TZS 120,000 per year, regardless of what you paid for the bond.

Yield to maturity (YTM)

YTM is the actual annualized return you'd earn if you bought the bond at its current price and held it to maturity, accounting for the coupon payments and any difference between your purchase price and the face value you'll receive back.

Why they differ

If you buy a bond above face value ("at a premium"), your YTM will be lower than the coupon rate, because you paid more than you'll get back at maturity. If you buy below face value ("at a discount"), YTM will be higher than the coupon rate.

Why it matters

Comparing bonds by coupon rate alone can be misleading if their prices differ. YTM gives a more accurate, apples-to-apples comparison of expected return. This app's Bond Yield Calculator estimates YTM from price, coupon, and time to maturity.