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| Coupon Rate |
The coupon rate of a bond, note, or other fixed-income
security indicates the amount of interest that a particular bond pays out. More
specifically, the coupon rate represents the annual interest rate expressed as a
percentage of the bond�s face value, or principal. The term is synonymous with
a bond's nominal interest rate.
The term �coupon� derives from the days when bonds came as
actual physical certificates with bond coupons attached. Fixed-income investors
would then clip these coupons from the certificates and would redeem them for
cash at their local bank.
