Coupon Rate


Coupon rate is the interest rate that the issuer of a bond agrees to pay to the bondholder periodically. The coupon rate can be either fixed or variable, and is a percentage of the principal value invested by the bondholder.

Example

A 7 percent-annual bond of a company with a face-value of Rs 10,000 and with 10 years to maturity (trading at say, 7.6 percent YTM), will pay a coupon worth Rs 700 on a specified date each year. 

If it was a semi-annual bond, the payment of coupons would be done twice a year, and assuming it is the same coupon rate, the absolute disbursement will amount to two coupons of Rs 350 each.