Understanding Coupon Rate of Bonds

Very Easy Fixed Income Securities Bond Features

When investing in bond securities, it's crucial to understand their various features. One of the most important features of a bond is its coupon rate, which is the interest rate the bond issuer pays to bondholders.

Consider the following statement about bond features:

Which of the following statements correctly defines the term ‘coupon rate’?

The coupon rate is the yield that investors expect to earn if they hold the bond until maturity.

The coupon rate is the annual interest payment expressed as a percentage of the bond's face value.

The coupon rate is the market interest rate at which the bond is issued.

Hint

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