Financial Quotient

What is coupon rate?

Coupon rate is the promised annual interest payment as a percentage of the par value of the bond. Although the coupon rate is mostly quoted in annual terms, the exact coupon received by investors is dependent on the frequency of the payments.

For example, if the coupon rate is 4 per cent and the payment frequency is semi-annual, investors will receive 2 per cent every six months. For most bonds, the rate is fixed at the time of issuance, but there are some bonds with rates pegged to benchmarks such as the Singapore Interbank Offered Rate (Sibor) with or without some credit spread.

Please or to continue reading the full article. Learn more about ST PREMIUM.

Enjoy unlimited access to ST's best work

  • Exclusive stories and features on multiple devices
  • In-depth analyses and opinion pieces
  • ePaper and award-winning multimedia content
A version of this article appeared in the print edition of The Sunday Times on March 10, 2019, with the headline 'What is coupon rate?'. Print Edition | Subscribe