Calculating the coupon of a bond is a fundamental aspect of fixed-income investments. A bond’s coupon rate represents the fixed interest payment it makes to investors annually, expressed as a percentage of its face value.
Understanding how to calculate a bond’s coupon is crucial for investors to determine the potential income and overall value of their investment. The coupon payment directly impacts the bond’s yield and can influence its market price. Historically, bond coupons were physical certificates attached to the bond itself, but today, they are typically paid electronically.