Coupon rate
Financial Accounting glossary · Liabilities & Bonds Payable
Definition
Stated interest rate of a bond, applied to face value to determine periodic interest payments.
Coupon rate in plain English
A bond is basically an IOU: you lend a company money, and it promises to pay you back later plus interest along the way. The coupon rate is the fixed interest percentage printed on that IOU, and it's always multiplied by the bond's face value (its official amount, like $1,000) to figure the regular payment. So a 5% coupon rate on a $1,000 bond pays $50 of interest each year, no matter what the bond is trading for. The name comes from old paper bonds that had little tear-off coupons you'd redeem for each interest payment.
Practice Coupon rate
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