ECONOMICS
FINANCIAL MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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par value
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discount rate
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coupon rate
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maturity rate
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Detailed explanation-1: -Definition: Coupon rate is the rate of interest paid by bond issuers on the bond’s face value. It is the periodic rate of interest paid by bond issuers to its purchasers. The coupon rate is calculated on the bond’s face value (or par value), not on the issue price or market value.
Detailed explanation-2: -Understanding Coupon Rates A bond’s coupon rate can be calculated by dividing the sum of the security’s annual coupon payments and dividing them by the bond’s par value. For example, a bond issued with a face value of $1, 000 that pays a $25 coupon semiannually has a coupon rate of 5%.
Detailed explanation-3: -The coupon rate is the annual amount of interest that the owner of the bond will receive. To complicate things the coupon rate may also be referred to as the yield from the bond.