Bond Interest Rate

B

The bond interest rate is commonly referred to as the "coupon rate." This rate is the annual interest rate that the issuer of a bond promises to pay to the bondholder.

When an investor buys a bond, they are essentially lending money to the issuer, who promises to pay them back the principal amount plus interest over a specified period of time. The coupon rate is the interest rate that determines the amount of interest payments the bondholder will receive each year.

For example, if an investor purchases a bond with a $1,000 face value and a coupon rate of 5%, they will receive $50 in interest payments each year. This interest payment is typically made in two equal installments, known as semi-annual payments, of $25 each.

It's important to note that the coupon rate is fixed for the life of the bond and does not change based on market conditions. However, the market value of the bond may fluctuate based on factors such as changes in interest rates, credit ratings, and overall economic conditions.

In summary, the correct answer to the question is B. Coupon rate, which refers to the fixed annual interest rate that the issuer of a bond promises to pay to the bondholder.