Coupon Rate

The coupon rate is the annual Interest Rate paid by bond issuers to bondholders, expressed as a percentage of the bond’s Face Value. It represents the fixed amount of interest that the bondholder receives periodically until the bond matures.

For example, if a bond has a Face Value of $1,000 and a coupon rate of 5%, the bondholder will receive $50 each year until the bond matures. This payment is typically made semi-annually, so the bondholder would receive $25 every six months.

In another case, if a bond with a Face Value of $2,000 has a coupon rate of 7%, the bondholder would receive $140 annually, or $70 every six months.