Coupon rate

The rate of interest paid by bond issuers to its bond buyers is referred to as a coupon rate. Unlike traditional loans, the bond issuer determines the coupon rate, not the purchaser.  The coupon rate is expressed as a percentage of the bond’s face value (par value) and represents the annual interest payment made to bondholders. For example, if a bond with a par value of $1,000 has a coupon rate of 5%, the bondholder will receive $50 in interest annually.