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How is the interest rate on a bond determined?
Curious about Bonds
The interest rate on a bond is determined based on a variety of factors such as prevailing market interest rates, the creditworthiness of the issuer, the length of time until maturity, and the current economic conditions. Typically, the issuer will pay a fixed interest rate to the bondholders, known as the coupon rate, for the life of the bond. This rate is determined at the time of issuance and is based on the issuer's perceived creditworthiness and market conditions at that time. As market interest rates change, the price of the bond may fluctuate, but the coupon rate will remain fixed until the bond matures or is called by the issuer.
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