1. What is Coupon Rate?

The coupon rate is the annual interest rate paid on a bond, expressed as a percentage of the bond's face value. It represents the periodic interest payments the bondholder will receive.

2. How Does the Calculator Work?

The calculator uses the coupon rate formula:

Where:

• Annual Coupon Payment — The yearly interest payment received from the bond
• Face Value — The bond's par value or principal amount

Explanation: The formula calculates what percentage the annual payment is of the bond's face value.

3. Importance of Coupon Rate

Details: The coupon rate helps investors compare bonds, understand their income potential, and assess the bond's yield relative to its price.

4. Using the Calculator

Tips: Enter the bond's annual coupon payment and face value in dollars. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Is coupon rate the same as yield?
A: No, coupon rate is fixed based on the bond's terms, while yield varies with the bond's current market price.

Q2: What if a bond pays semi-annual coupons?
A: Multiply the semi-annual payment by 2 to get the annual payment for this calculation.

Q3: What are typical coupon rates?
A: Rates vary by market conditions and bond risk, typically ranging from 0% (zero-coupon) to 10% or more for high-risk bonds.

Q4: Can coupon rate change over time?
A: For fixed-rate bonds, no. For floating-rate bonds, yes - they're tied to reference rates.

Q5: What's the relationship between coupon rate and bond price?
A: Bonds trade at premium (above face value) when coupon rate > market rate, and at discount when coupon rate < market rate.