What is the difference between coupon value and face value? - ProProfs Discuss
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What is the difference between coupon value and face value?

Asked by BOYD, Last updated: Jul 08, 2021

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John Smith

John Smith

John Smith
John Smith

Answered Sep 08, 2016

The coupon rate is the interest rate that the issuer will pay to the investor. the amount paid is calculated against the face value of the bond.the face value of the bond is the principal amount of the loan that the issuer must pay back to the bond holder upon maturity.example: you purchase a $1,000 face value bond with a coupon rate of 6%.each year, the issuer will pay a total of $60 interest to the bond holder (6% of the face value is $1,000 x 0.06 = $60).when the bond matures, the issuer must pay the bond holder the face value of $1,000 back to the bondholder.keep in mind that a basis point is 1/100 of a percentage point. so 50 basis points would be 50/100 of a percentage point, or 0.50%. that means 100 basis points would be equal to 1% (100/100 of a percentage point = 1%).
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