The government of Brunasia issues bonds with a guarantee to make periodic interest payments on the par value. The government offers a 6.5% interest on its bonds. In this case, the percentage of interest offered by the government of Brunasia is called the ___.

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Buck

Business

21 March, 12:25

The government of Brunasia issues bonds with a guarantee to make periodic interest payments on the par value. The government offers a 6.5% interest on its bonds. In this case, the percentage of interest offered by the government of Brunasia is called the ___.

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Sergio Tyler · Answer 1

Coupon rate

Explanation:

Bonds are fixed-income securities that involves a contractual obligation between the lender and the borrower wherein the lender makes certain funds available to the borrower in return for periodic interest payment-coupon rate as well as the repayment of principal upon redemption.

Coupon rate is the fixed interest payment on the bonds on semi-annually or annually basis. The coupon rate is a way of making cash available to investors in the bonds from time to time for transactionary purposes.

Imagine a pensioner that invested his entire retirement benefits in bonds, that would require some cash on regular basis to keep body and soul together, that is power of coupon interest.