Find the coupon rate of a bond

Not all bonds have coupons. Such bonds make only one payment: Normally, to compensate the bondholder for the time value of money , the price of a zero-coupon bond will always be less than its face value on any date before the maturity date. During the European sovereign-debt crisis , some zero-coupon sovereign bonds traded above their face value as investors were willing to pay a premium for the perceived safe-haven status these investments hold.

The difference between the price and the face value provides the bondholder with the positive return that makes purchasing the bond worthwhile. Between a bond's issue date and its maturity date also called its redemption date , the bond's price is determined by taking into account several factors, including:.

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Find Coupon Rate: bonds,16yr mat., $; % yield

Upper Saddle River, New Jersey You'll also need to locate the bond expiration or maturity date. This information is also provided to you by your broker. Find the bond coupon rate. The coupon rate is usually expressed as a percentage e. Get the current yield, if available. The current yield will show you your return on your bond investment, exclusive of capital gains.

Coupon (bond)

The current yield may or may not be provided by your broker. If it isn't provided, don't worry about it. Use the coupon rate and the face value to calculate the annual payment. If you know the face value of the bond and its coupon rate, you can calculate the annual coupon payment by multiplying the coupon rate times the bond's face value. Use the current yield to calculate the annual coupon payment.

This only works if your broker provided you with the current yield of the bond. To calculate the payment based on the current yield, just multiply the current yield times the amount that you paid for the bond note, that might not be the same as the bond's face value. Calculate the payment by frequency. Since bondholders generally receive their coupon payments semiannually, you just divide the annual coupon payment by two to receive the actual coupon payment. Unanswered Questions.

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Bonds - Confused between the rates: Spot, Forward, Coupon, Current Yield, IRR, YTM, BEY

The coupon rate is the interest rate paid on a bond by its issuer for the term of the security. The term "coupon" is derived from the historical use of actual coupons for periodic interest payment collections.

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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.

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Changing market interest rates affect bond investment results. Since a bond's coupon rate is fixed all through the bond's maturity, a bondholder 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. 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.