What is a 'Coupon Rate'
A coupon rate is the yield paid by a fixedincome security; a fixedincome 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 changes as the value of the bond changes, thus giving the bond's yield to maturity.
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 issued with a face value of $1,000 that pays a $25 coupon semiannually has 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.Interest Rate
Coupon rate is the interest rate paid on a bond by its issuer for the term of the security. The name coupon is derived from the historical use of actual coupons for periodic interest payment collections. Once set at the issuance date, a bond's coupon rate remains unchanged, and holders of the bond receive fixed interest payments at a predetermined time frequency. A bond issuer decides on the coupon rate based on prevalent market interest rates, among others, at the time of the issuance. Market interest rates change over time, and as they move higher or lower than a bond's coupon rate, the value of the bond increases or decreases, respectively.
Market Rate
Changing market interest rates affect bond investment results. Since a bond's coupon rate is fixed all through the bond's maturity, a bond holder is stuck with receiving comparably lower interest payments when the market is offering a higher interest rate. An equally undesirable alternative is selling the bond for less than its face value at a loss. If the market rate turns lower than a bond's coupon rate, holding the bond is advantageous as other investors may want to pay more than the face value for the bond's comparably higher coupon rate. Thus, bonds with higher coupon rates provide a margin of safety against rising market interest rates.
Yield to Maturity
When investors buy a bond initially at face value and then hold the bond to maturity, the interest they earn on the bond is based on the coupon rate set forth at the issuance. For investors acquiring the bond on the secondary market, depending on the prices they pay, the return they earn from the bond's interest payments may be higher or lower than the bond's coupon rate. This is the effective return called yield to maturity. For example, a bond with a par value of $100 but traded at $90 gives the buyer a yield to maturity higher than the coupon rate. Conversely, a bond with a par value of $100 but traded at $110 gives the buyer a yield to maturity lower than the coupon rate.

Coupon Bond
A debt obligation with coupons attached that represent semiannual ... 
Current Coupon Bond
A bond with a coupon rate that is within 0.5\% of the current ... 
Coupon
The annual interest rate paid on a bond, expressed as a percentage ... 
ZeroCoupon Bond
A debt security that doesn't pay interest (a coupon) but is traded ... 
Bond
A debt investment in which an investor loans money to an entity ... 
Short Coupon
A payment made on a bond within a shorter time interval than ...

Markets
How Does A Bondâ€™s Coupon Interest Rate Affect Its Price?
All bonds come with a coupon interest rate, which is the fixed annual interest a bond pays. 
Investing
Explaining the Coupon Rate
Coupon rate is the stated interest rate on a fixed income security. 
Markets
Comparing Yield To Maturity And The Coupon Rate
Investors base investing decisions and strategies on yield to maturity more so than coupon rates. 
Investing
What is a "Coupon"?
In the financial world, â€ścouponâ€ť represents the interest rate on a bond. 
Markets
Using Excel PV Function to compute Bonds PV
To determine the value of a bond today  for a fixed principal (par value) to be repaid in the future at any predetermined time  we can use an Excel spreadsheet. 
Managing Wealth
Understanding Bond Prices and Yields
Understanding this relationship can help an investor in any market. 
Markets
Simple Math for FixedCoupon Corporate Bonds
A guide to help to understand the simple math behind fixedcoupon corporate bonds. 
Markets
If I Buy A $1,000 10Year Bond With A 10% Coupon, Will I Receive $100 Each Year?
Investors can count on a fixedincome security paying them a certain amount of cash as long as the security is held until maturity and the issuer doesnâ€™t default. 
Managing Wealth
Risks To Consider Before Investing In Bonds
Make sure you understand the risks associated with bonds before making an investment decision. 
Personal Finance
Coupon Shopping: Clip Your Way To Savings
Use coupons strategically to score big savings on everyday purchases.

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 >> 
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 >> 
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 governmentdictated interest rates and the ... Read Answer >> 
How do debit spreads impact the trading of options?
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 >> 
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 >> 
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 >>