The fixed interest rate that a bond issuer promises to pay you each year. This rate is set when the bond is issued and does not change during the bond's life. It is expressed as a percentage of the bond's face value.
A bond with a face value of $1,000 has a coupon rate of 4%. The issuer will pay you $40 each year ($1,000 times 4%) until the bond matures, regardless of what happens to the bond's market price.
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