Coupon Rate

Posted in Finance, Accounting and Economics Terms, Total Reads: 971
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Definition: Coupon Rate

Almost all the bonds entail a fixed amount to be paid to the bond holder in the form of interest periodically. The frequency of payment is generally 3months, 6 months or 1 year. These are the coupon payments.

Coupon rate (also known as coupon yield) is the rate at which these Coupon Payments are made. I.e. when these payments are divided by the bond’s par value, it gives the coupon rate. This rate is expressed as a percentage of the par value.


Example:

For example, if a bond has a par value of Rs 1000, and it paysan interest of Rs 100 each year, then the coupon rate of bond is 100/1000. I.e. 10%


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