ECONOMICS (CBSE/UGC NET)

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: -The coupon rate is the rate of interest that the company or government will pay the bondholder. The interest rate can be either fixed or floating. A floating rate might be tied to a benchmark such as the yield of the 10-year Treasury bond.

Detailed explanation-3: -The coupon rate is the annual income an investor can expect to receive while holding a particular bond. It is fixed when the bond is issued and is calculated by dividing the sum of the annual coupon payments by the par value. At the time it is purchased, a bond’s yield to maturity and its coupon rate are the same.

Detailed explanation-4: -Coupon rate, also known as the nominal rate, nominal yield or coupon payment, is a percentage that describes how much is paid by a fixed-income security to the owner of that security during the duration of that bond. For example, you can purchase a 10-year bond with a face value of $100 and a bond coupon rate of 5%.

Detailed explanation-5: -The coupon rate is the interest rate paid by a bond relative to its par or face value. For a fixed-rate bond, this will be the same for its entire maturity.