1. What is Coupon Rate?

The coupon rate of a bond is the annual interest rate paid by the bond issuer relative to the bond's face value. It represents the yield the bond pays based on its face value.

2. How Does the Calculator Work?

The calculator uses the coupon rate formula:

Where:

• Annual Coupon Payment — The total interest payment per year
• Face Value — The principal amount of the bond at maturity

Explanation: The formula calculates what percentage of the face value is paid out annually in interest.

3. Importance of Coupon Rate

Details: The coupon rate helps investors compare bonds and understand their fixed income potential. It's a key factor in bond pricing and yield calculations.

4. Using the Calculator

Tips: Enter the annual coupon payment in dollars and the 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 face value, while yield varies with market price and time to maturity.

Q2: What's a typical coupon rate?
A: Rates vary by market conditions and credit risk, typically ranging from 0% (zero-coupon) to 10% or more for high-risk bonds.

Q3: How often are coupon payments made?
A: Most bonds pay semiannually, but the coupon rate is always expressed as an annual percentage.

Q4: What happens if market interest rates change?
A: The coupon rate stays fixed, but the bond's market price will adjust to reflect current yields.

Q5: Can coupon rate be zero?
A: Yes, zero-coupon bonds don't pay periodic interest but are sold at a discount to face value.