Coupon Rate

The coupon rate is the fixed percentage of a bond's face value that the issuer agrees to pay annually as interest. For example, if a bond has a $1,000 face value and a 5% coupon rate, the holder receives $50 each year. This rate helps investors understand the bond's regular interest income, providing a predictable return. It remains constant throughout the life of the bond, regardless of changes in interest rates or market conditions. Essentially, the coupon rate is the bond's stated interest rate, serving as a key factor in evaluating the investment's income potential.