ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The coupon rate is calculated on the bond’s face value (or par value), not on the issue price or market value. For example, if you have a 10-year-Rs 2, 000 bond with a coupon rate of 10 per cent, you will get Rs 200 every year for 10 years, no matter what happens to the bond price in the market.

Detailed explanation-2: -The coupon rate, or coupon payment, is the nominal yield the bond is stated to pay on its issue date. This yield changes as the value of the bond changes, thus giving the bond’s yield to maturity (YTM).

Detailed explanation-3: -A coupon bond, also referred to as a bearer bond or bond coupon, is a debt obligation with coupons attached that represent semiannual interest payments. With coupon bonds, there are no records of the purchaser kept by the issuer; the purchaser’s name is also not printed on any kind of certificate.

Detailed explanation-4: -A bond’s coupon rate is the rate of interest that the bond pays annually. In addition, a bond’s designated credit rating will influence its price and it can happen that when looking at a bond’s price, you will find it does not honestly show the relationship between other interest rates and the coupon rate at all.

Detailed explanation-5: -Regular bonds, which are also called coupon bonds, pay interest over the life of the bond and also repay the principal at maturity. A zero-coupon bond does not pay interest but instead trades at a deep discount, giving the investor a profit at maturity when they redeem the bond for its full face value.