Friday, May 29

Coupon Rate

A bond carries a specific rate of interest which is also called the Coupon Rate.

For example, if the Face Value of the bond is Rs 100 and the bond is issued at 8% coupon rate, the Interest would be calculated on the Face Value of the bond. That is, annual interest would be
Rs 100 x 8% = Rs 8 per annum.

Generally, the bonds may be issued or traded at a Par (Face Value), at a premium or at a discount to Face Value.

Interest paid would be tax deductible for the issuer.

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