Nominal yield
The coupon rate (nominal rate, or nominal yield) of a fixed income security is the interest rate that the issuer agrees to pay to the security holder each year, expressed as a percentage of the security's principal amount or par value.[1] The coupon rate is typically stated in the name of the bond, such as "US Treasury Bond 6.25%". Unlike current yield, it does not vary with the market price of the security.
Coupon rates are fixed for the life of the security, except in the case of floating-rate bonds.[2]
References
[edit]- ^ Thau, Annette (2001). The Bond Book (Revised ed.). New York: McGraw-Hill. p. 3. ISBN 0-07-135862-5.
- ^ Thau p. 4.
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