Coupon Rate
Coupon rate is a term used in finance to describe the amount of interest paid on a fixed-income security, such as a bond or preferred stock. The coupon rate is expressed as a percentage of the security’s face value. It is also known as the nominal yield or the coupon yield. The coupon rate is determined when the security is issued and remains fixed throughout the life of the security.
History of Coupon Rate
The term coupon rate originates from the physical coupons that were attached to bonds in the past. Investors would clip the coupon and redeem it for the interest payment. The coupon rate was the percentage of the bond’s face value that was paid out in interest. Today, most bonds are issued electronically and the coupon rate is still used to refer to the interest rate paid on the bond.
Comparison Table
| Security | Coupon Rate |
|---|---|
| Bond | 5% |
| Preferred Stock | 7% |
Summary
Coupon rate is an important term in finance that describes the amount of interest paid on a fixed-income security. It is expressed as a percentage of the security’s face value and is determined when the security is issued. For more information about coupon rate, you can visit websites such as Investopedia, The Balance, and InvestingAnswers.
See Also
- Yield
- Interest Rate
- Bond
- Preferred Stock
- Face Value
- Maturity Date
- Par Value
- Yield to Maturity
- Yield Curve
- Yield Spread
