What is the difference between a bond yield and a bond coupon rate?

What is the difference between a bond yield and a bond coupon rate Introduction: The Basics of Bonds Hello, everyone! Welcome to our video on bond yield and bond coupon rate. Before we dive into the differences, let's quickly recap the basics of bonds. Bonds are debt instruments issued by corporations, municipalities, and governments to raise capital. They are essentially IOUs, where the issuer promises to repay the principal amount at maturity and make periodic interest payments. Understanding Bond Coupon Rate The bond coupon rate is the fixed annual interest rate that the issuer agrees to pay to bondholders. It is usually expressed as a percentage of the bond's face value. For example, a $1,000 bond with a 5% coupon rate will pay $50 in interest annually. The term 'coupon' originates from the detachable coupons that bondholders used to physically present to receive their interest payments. Exploring Bond Yield Bond yield, on the other hand, is a measure of the return an investor can expect from a bond. It takes into account not only the coupon payments but also the bond's price in the secondary market.