Nominal yield in the context of "Coupon (finance)"

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⭐ Core Definition: Nominal yield

The coupon rate (nominal rate, or nominal yield) of a fixed income security is the interest rate that the issuer agrees to pay to the security holder each year, expressed as a percentage of the security's principal amount or par value. The coupon rate is typically stated in the name of the bond, such as "US Treasury Bond 6.25%". Unlike current yield, it does not vary with the market price of the security.

Coupon rates are fixed for the life of the security, except in the case of floating-rate bonds.

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Nominal yield in the context of Coupon (bond)

In finance, a coupon is the interest payment that a bond issuer promises to pay a bondholder regularly from the date of issuance until the date of maturity of a bond.

Coupons are normally described in terms of the "coupon rate", which is calculated by adding the sum of coupons paid per year and dividing it by the bond's face value. For example, if a bond has a face value of $1,000 and a coupon rate of 5%, then it pays total coupons of $50 per year. Typically, this will consist of two semi-annual payments of $25 each.

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LINKED FROM (PARENTS)
← Coupon (bond) ← Coupon (finance)
LINKS TO (CHILDREN)
Fixed income security → Current yield → Floating-rate bond →