Summary
The Coupon is the annual interest rate paid by the bond issuer to bondholders, usually expressed as a percentage of the bond’s face value.
It determines the regular interest income paid by the bond.
Why it matters
The coupon rate shows the income payment promised by the issuer. It is important for investors who rely on regular income from bonds.
However, coupon is not the same as the bond’s current yield or yield to maturity.
How it is calculated
Annual Coupon Payment = Face Value × Coupon Rate
How to read it
A higher coupon generally means larger regular interest payments. A lower coupon means smaller regular payments.
Investors should compare coupon with current price and YTM to understand the bond’s actual return profile.