# Coupon Rate

## What is a 'Coupon Rate'

A coupon rate is the yield paid by a fixed income security. A fixed income security's coupon rate is simply just the annual coupon payments paid by the issuer relative to the bond's face or par value. The coupon rate is the yield the bond paid on its issue date. This yield, however, will change as the value of the bond changes, thus giving the bond's yield to maturity.

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## BREAKING DOWN 'Coupon Rate'

A bond's coupon rate can be calculated by dividing the sum of the security's annual coupon payments and dividing them by the bond's par value. For example, a bond which was issued with a face value of \$1000 that pays a \$25 coupon semi-annually would have a coupon rate of 5%. All else held equal, bonds with higher coupon rates are more desirable for investors than those with lower coupon rates.

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RELATED FAQS
1. ### What is the most common solvency ratios used in fundamental analysis?

Learn about the difference between a bond's coupon rate and its yield rate, how the coupon rate influences market price and ... Read Answer >>
2. ### What is the difference between yield to maturity and the coupon rate?

Read about some of the basic differences between a debt security's coupon rate and its yield to maturity, and learn which ... Read Answer >>
3. ### How does a bond's coupon interest rate affect its price?

Find out why the difference between the coupon interest rate on a bond and prevailing market interest rates has a large impact ... Read Answer >>
4. ### How does a bond's coupon rate affect its price?

Find out how a bond's coupon rate influences its price, including the role of government-dictated interest rates and the ... Read Answer >>

Find out what it means when a bond has a coupon rate of zero and how a bond's coupon rate and par value affect its selling ... Read Answer >>
6. ### Why do bond coupon rates vary so greatly?

Learn about the two major reasons that cause bond coupon rates to vary so dramatically and what role coupons play in the ... Read Answer >>
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