Stated interest rate

Definition

The stated interest rate is the annual interest rate printed on the face of a bond or loan agreement. It represents the nominal rate that doesn't account for compounding or inflation effects.

5 Must Know Facts For Your Next Test

1. The stated interest rate is also known as the coupon rate for bonds.
2. It determines the periodic interest payments made to bondholders.
3. The stated interest rate does not change over the life of fixed-rate bonds.
4. Market conditions can cause the market value of a bond to differ from its face value, even if the stated interest rate remains constant.
5. Bonds can be issued at a premium or discount based on how their stated interest rates compare to current market rates.

Related terms

Coupon Rate: The annual interest rate paid by bond issuers to bondholders, synonymous with the stated interest rate.

Market Interest Rate:

The prevailing interest rate available in the market that investors demand for similar risk and maturity investments.

Bond Premium: Occurs when a bond's market price is above its face value because its coupon rate exceeds current market rates.