What does the coupon rate on a bond usually represent?
Correct answer: A. The bond's annual interest payment as a percentage of face value
- A. The bond's annual interest payment as a percentage of face value
- B. The bond's selling price as a percentage of market value
- C. The issuer's annual tax rate on profits
- D. The investor's total gain after maturity
Explanation
The coupon rate is the stated annual interest payment divided by the bond's face value. It is different from the current yield, which uses the bond's market price as the denominator.
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