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Bond Price Calculator: Figure the Market Value of Bonds
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Precious Metal. Market Watch. Pinterest Reddit. ET Online. It is the periodic rate of interest paid by bond issuers to its purchasers. For example, if you have a year- Rs 2, bond with a coupon rate of 10 per cent, you will get Rs every year for 10 years, no matter what happens to the bond price in the market. Description: The government and companies issue bonds to raise money to finance their operations. When you buy a bond, the bond issuer promises periodic annually or semi-annually interest payments on the money invested at the coupon rate stated in the bond certificate.
The bond issuer pays the interest annually until maturity, and after that returns the principal amount or face value also. Coupon rate is not the same as the rate of interest. An example can best illustrate the difference. Suppose you bought a bond of face value Rs 1, and the coupon rate is 10 per cent. Every year, you'll get Rs 10 per cent of Rs 1, , which boils down to an effective rate of interest of 10 per cent. However, if you bought the bond above its face value, say at Rs 2,, you will still get a coupon of 10 per cent on the face value of Rs 1, Coupon payments represent a percentage of the face value of a bond.
The issuer attached them. Bond-holders would collect their interest by taking off the coupons and cashing them in. According to the Financial Times Lexicon , the coupon rate is:. Zero-coupon bonds only make the payment of the face value on the maturity date. The payment is based on its face value. How much the return will be assuming the bondholder keeps it until it matures.
Coupon rate - definition and meaning - Market Business News
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Related face value times coupon rate
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