Definition of coupon rate

interest rate on the face amount of a debt security. For instance, the annual interest to be paid on a $1000 bond with a nominal interest rate of 8% is $80. Typically, interest payments are made semiannually. The term derives from bearer bondonce more common than now, which actually bore coupons to be detached and presented for payment as interest became due. Even with registered bondsthe term survives and is distinguished from yield, which relates the coupon rate to the market price of the bond.

1. nominal annual rate of interest the issuer of a note or bond promises to pay the holder during the period the securities are outstanding. In mortgage banking, it refers to the contract rate of interest on mortgage-backed securities
2. the annual rate of interest shown on the face of a loan agreement or mortgage.