A coupon rate is the penalty the issuing company must pay to bondholders when it redeems bonds before their maturity date.

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A coupon rate is the fixed percentage that the issuing company pays to bondholders as interest on the bond's face value (par value) until its maturity date. If the issuing company redeems the bonds before maturity, they typically have to pay a premium rather than a penalty to bondholders.

A Coupon Rate Is the Penalty the Issuing Company Must