Legal Definitions - coupon rate

Definition: The coupon rate is the interest rate that a bond issuer promises to pay to the bondholder. It is the fixed percentage of the bond's face value that the bondholder will receive as interest payments over the life of the bond.

Example: If a bond has a face value of $1,000 and a coupon rate of 5%, the bondholder will receive $50 in interest payments each year until the bond matures.

The example illustrates that the coupon rate is the fixed percentage of the bond's face value that the bondholder will receive as interest payments. In this case, the bondholder will receive 5% of the bond's face value, which is $50 per year.