The interest rate that determines the amount of cash interest the borrower pays each year to the bondholder is the:

Question

Quizplus · Accepted Answer

The stated interest rate is the rate mentioned in the bond contract and is used to calculate the cash interest payment that the borrower needs to pay to the bondholder. It is also called the coupon rate of the bond. B) Effective interest rate is the rate that takes into account the compounding of interest over the bond's lifetime, and C) Market interest rate is the prevailing rate in the market for a similar type of bond at a particular point in time. D) Explicit interest rate is not a commonly used term in finance.

The Interest Rate That Determines the Amount of Cash Interest