Coupon Rate

Coupon rate means the fixed interest rate a bond pays based on its face value. In simple terms, coupon rate shows the regular interest payment promised by the bond. Coupon rate is important because it determines the bond’s scheduled interest payments. Investors compare coupon payments with market yields to understand a bond’s attractiveness. For example, a bond with a $1,000 face value and a 5% coupon rate pays $50 in interest per year. Coupon rate is not the same as yield. Coupon rate is fixed when the bond is issued, while yield changes with the bond’s market price.