A bond's coupon rate

Question

Quizplus · Accepted Answer

The coupon rate of a bond is the fixed rate of interest that the issuer pays to the bondholders annually, based on its par value. Therefore, the correct statement among the given options is "C) equals its annual coupon payment divided by its par value." Option A is incorrect because dividing the annual coupon payment by the bond's market price gives us the bond's yield, not the coupon rate. Option B is also incorrect because the coupon rate remains constant throughout the life of the bond.

A Bond's Coupon Rate