What is coupon rate?

Definition of Coupon Rate, Coupon Rate Meaning - The Economic Times 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.

What is the coupon rate formula for bonds?

The term coupon rate formula for bonds refers to the fixed rate of interest that is paid annually on fixed-income securities like bonds. It is calculated based on the percentage of the bond’s face value. When a company issues a bond for the purpose of raising capital, the agreement has a stated coupon rate or interest rate mentioned in it.

What is the difference between coupon rate and yield?

The coupon rate is the stated periodic interest payment due to the bondholder at specified times. The bond's yield is the anticipated rate of return from the coupon payments alone, calculated by dividing the annual coupon payment by the current market price of the bond.

What is a 6% coupon rate?

The current yield compares the coupon rate to the current market price of the bond. Therefore, if a $1,000 bond with a 6% coupon rate sells for $1,000, then the current yield is also 6%; however, because the market price of bonds can fluctuate, it may be possible to purchase this bond for a price that is above or below $1,000.