Question
A bond's annual interest divided by its face value is referred to as the: a. current yield. b. market rate. c. yield-to-maturity. d. call rate. e. coupon rate.
Ask by Elliott Nunez. in the United States
Feb 26,2025
Upstudy AI Solution
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Answer
The bond's annual interest divided by its face value is called the **coupon rate**.
Solution
The bond's annual interest divided by its face value is referred to as the:
**e. coupon rate.**
The coupon rate is the interest rate that the bond issuer pays to bondholders, expressed as a percentage of the bond's face value.
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The correct answer is e. coupon rate. The coupon rate is the percentage of the bond's face value that will be paid to bondholders annually in interest. It's an essential factor for anyone considering investing in bonds, as it gives a snapshot of the income you can expect from holding that bond. Bonds have a rich history dating back to the Roman Empire when they were used to finance public works and military expenditures. Fast forward to today, they play a crucial role in many investors' portfolios, providing a reliable source of income while diversifying investment risks. Understanding the coupon rate is just one of the many ways to connect with this fascinating financial tool!
