Coupon Rate
The annual interest a bond pays, expressed as a percentage of its face value.
Formula
Annual Coupon = Face Value x Coupon Rate
Unit
%
In depth
The coupon rate is fixed at issue and never changes for a conventional bond, which means it says what the bond pays and not what it earns — the yield does that, and the two differ whenever the bond trades away from par. Coupons are typically paid semi-annually in India for government securities and either annually or semi-annually for corporate paper. A high coupon indicates the credit or rate environment at issue, not the current attractiveness of the bond. Confusing coupon with yield is the single most common mistake in fixed income, and it leads investors to buy high-coupon bonds at prices that make their actual returns ordinary.
Worked example
An 8% coupon on a ₹1,000 face value pays ₹80 a year, or ₹40 twice yearly. If the bond trades at ₹1,080, the buyer receives the same ₹80 while having paid 8% more for it — a yield well below 8%.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Coupon Rate” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.