PIK bonds


lets say one has a $1000 par bond with a semi annual coupon of 15%

at coupon date, what would be the new nominal ? 1000*1.075 ? or less because of compounding so that ytm is indeed 15% ?

As bonds’ YTMs are normally quoted as BEY, I would expect that the nominal value after 6 months would be $1,075 (= $1,000 × (1 + 7.5%)).

thanks, that’s what I thought also but that did not work with a bond I looked at today.

I realized now: it’s probably because it was recently issued and it was not a full coupon period (6month) between the issue date and 1st coupon date (so less than 7.5% accrued and was paid in kind)

thank you

My pleasure.