1. What is Coupon Rate?

The coupon rate is the annual interest rate paid on a bond's face value. It represents the percentage of the bond's face value that will be paid annually in interest payments.

2. How Does the Calculator Work?

The calculator uses the coupon rate formula:

Where:

• Annual Coupon — The yearly interest payment in USD
• Face Value — The bond's par value or principal amount in USD

Explanation: The formula calculates what percentage of the bond's face value is paid out annually as interest.

3. Importance of Coupon Rate

Details: The coupon rate helps investors compare bonds and understand their potential returns. It's a key factor in determining a bond's yield and price in the secondary market.

4. Using the Calculator

Tips: Enter the bond's annual coupon payment and face value in USD. 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 at issuance, while yield fluctuates based on the bond's current price.

Q2: What's a typical coupon rate?
A: Rates vary by market conditions and bond quality, typically ranging from 2-10% for investment-grade bonds.

Q3: Can coupon rate change over time?
A: For fixed-rate bonds, no. For floating-rate bonds, yes - it adjusts based on a reference rate.

Q4: What's a zero-coupon bond?
A: A bond that pays no periodic interest but is issued at a discount to face value.

Q5: How does coupon rate affect bond price?
A: When market rates rise above a bond's coupon rate, its price typically falls, and vice versa.