What happens to the coupon rate of a $1,000 face value bond that pays $80 annually in interest if market interest rates change from 9% to 10%?

Question

Quizplus · Accepted Answer

The coupon rate of a bond is fixed at issuance and represents the annual interest payment divided by the face value of the bond. In this case, the bond pays $80 annually on a $1,000 face value, which is an 8% coupon rate ($80/$1,000 = 0.08 or 8%). Changes in market interest rates do not affect the coupon rate of existing bonds.

What Happens to the Coupon Rate of a $1,000 Face