Coupon Rate
The bond's stated annual interest as a percentage of par.
What is Coupon Rate?
Fixed at issuance and applied to par value, not to market price. It never changes over the bond's life, which is why current yield and yield to maturity drift away from it as the price moves.
Coupon Rate: a worked example
A 5% coupon on $1,000 par always pays $50, whether the bond trades at $900 or $1,100.
More terms in Securities & Instruments
Common Stock
An ownership share in a company, with voting rights and last claim on assets.
Preferred Stock
Equity with a fixed dividend and priority over common, usually without votes.
Bond
A loan to an issuer that pays interest and returns principal at maturity.
Yield to Maturity (YTM)
The total annualized return if you buy today and hold to maturity.
Par Value (Face Value)
The principal repaid at maturity, conventionally $1,000 per bond.
Duration
A bond's price sensitivity to a 1% change in interest rates.
Credit Rating
An agency's assessment of an issuer's likelihood of default.
High-Yield (Junk) Bond
A below-investment-grade bond paying more to compensate for default risk.