Start with face value
A coupon describes interest relative to a bond’s face value. In a simple illustration, a ₹1,000 face-value bond with an 8% annual coupon pays ₹80 a year while that principal remains outstanding.
Your purchase price matters
If you pay ₹1,100 for that same bond, the ₹80 annual interest is about 7.27% of your purchase price. That is a simplified current-yield calculation; it is not yield to maturity.
Yield to maturity also accounts for the timing of payments and the amount repaid at maturity. Settlement dates, accrued interest and the instrument’s actual cash flows matter. Fees and taxes can affect what you ultimately receive.
Compare with the right inputs
A larger coupon alone does not establish a better investment. Check the price and date used for a yield calculation, the repayment terms, and whether call or put options may change the cash flows. When comparing bonds, look at the price you would pay as well as the coupon.