Bond yields and coupon rates
Current yield is derived by taking the bond’s coupon yield and dividing it by the bond’s price. Suppose you had a $1,000 face value bond with a coupon rate of 5 percent, which would equate to $50 a year in your pocket. If the bond sells today for 98 (meaning that it is selling at a discount for $980), the current yield is $50 divided by The nominal value is the price at which the bond is to be repaid. The coupon shows the interest that the respective bond yields. The issuer of the bond takes out a loan on the capital market and Technical terms surrounding bonds are numerous and can sometimes be confusing. Below we have defined the terms surrounding the different bond yields. Coupon Rate on Bonds Definition. The coupon rate of a bond represents the amount of actual interest that is paid out on a bond relative to the principal value of the bond (par value).