The coupon rate or required return of bonds is equal to the stated rate on the bond's contract.

Question

Quizplus · Accepted Answer

The coupon rate is the interest rate stated on the bond contract that the issuer promises to pay the bondholder. This rate does not necessarily equal the required return or yield that investors demand in the market, which may fluctuate based on factors such as interest rate movements, credit risk, and inflation expectations. Thus, while the coupon rate is a contractual obligation of the bond issuer, it may not reflect the actual return received by investors who buy and sell bonds on the secondary market.

The Coupon Rate or Required Return of Bonds Is Equal