Coupon rate calculation from yield is a financial method used to determine the fixed interest rate paid by a bond. For instance, a bond with a face value of $1,000, a yield of 5%, and a coupon rate of 4% would pay $40 in annual interest.
Calculating coupon rate from yield is important for investors as it provides insights into the bond’s value and return potential. Historically, the development of yield curves has influenced how investors calculate coupon rates.