# What affects bond coupon rate

##### *2019-09-16 17:26*

How can the answer be improved?Like government bonds, a corporate bond pays a fixed amount of interest each year, which is called the coupon rate. If bond prices fall, the effective interest rate (called the yield) goes up because an investor pays less but gets the same coupon rate. Conversely, if the bond price increases, the percentage yield goes down. what affects bond coupon rate

Bonds pay a fixed rate of interest called the coupon rate. For example, a bond with a 10, 000 face amount and a 6percent coupon rate will pay an investor 600 in interest every year plus the 10, 000 face amount when the bond matures.

Market interest rate and bond value: If the interest rate is higher, the bond price is lower and vice versa. If the interest rate falls, bond prices can rise substantially, due to the concept of opportunity cost of investments. The relative level of a bonds market interest rate and its coupon rate affects bond prices differently when comparing prices of bonds with different payment frequencies. Payment Frequency Payment frequency mainly affects interest compounding.**what affects bond coupon rate** How Coupon Rate Affects the Price of a Bond. All types of bonds pay an annual interest to the bondholder, and the amount of interest is known as the coupon rate. Unlike other financial products, the dollar amount (and not the percentage) is fixed over time.

A typical bonds coupon ratethe annual interest rate it Inflation also affects interest featuring articles from Business in Greater Gainesville *what affects bond coupon rate* The yield represents the effective interest rate on the bond, determined by the relationship between the coupon rate and the current price. Coupon rates are fixed, but yields are not. Another example would be that a 1, 000 face value bond has a coupon interest rate of 5. The rate at which the issuer pays youthe bond's stated interest rate or coupon rateis generally fixed at issuance. An inverse relationship Interest rate risk is the risk that changing interest rates will affect bond prices. When current interest rates are greater than a bond's coupon rate, the bond will sell below its face value at a discount. When interest rates are less than the coupon rate, the bond can be sold at a premiumhigher than the face value. This is due to the fact that for a fixedrate bond, the issuer has promised to pay a coupon based on the face value of the bond so for a 1, 000 par,