A coupon rate is?

The coupon rate represents the annual interest payment that a bondholder receives based on the bond's face value. It's expressed as a percentage and is crucial for investors as it indicates the return they can expect from the bond in the form of periodic interest payments. For example, if a bond has a face value of $1,000 and a coupon rate of 5%, the bondholder will receive $50 each year until maturity. Understanding the coupon rate is essential for assessing the attractiveness of a bond investment compared to other financial instruments, considering factors such as market interest rates and inflation. This makes the coupon rate fundamentally important in bond valuation and investment strategy.