Question

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 ___.

Answer 1

Coupon rate

Step-by-step 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.