A bond's coupon rate

Question

Quizplus · Accepted Answer

The coupon rate is a fixed percentage of the bond's par value that is paid annually as interest to the bondholder. It is calculated by dividing the annual coupon payment by the bond's par value, not its current market price. The coupon rate remains fixed throughout the life of the bond and does not vary. Therefore, choice C is correct. Option A is incorrect because it divides the annual coupon payment by the current market price, which is not the correct way to calculate the coupon rate. Option B is also incorrect because the coupon rate is fixed and does not vary over the life of the bond.

A Bond's Coupon Rate