Nominal Yield

Nominal yield

The income received from a fixed income security in one year divided by its par value. See also: Coupon rate.

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Coupon Rate

The interest rate that a bond pays to a bondholder, usually semi-annually. The coupon rate is stated on the bond. This is also called the nominal yield or the yield rate.

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Nominal yield. Nominal yield is the annual income that you receive from a bond or other fixed-income security divided by the par value of the security.

The result, stated as a percentage, is the same as the rate of interest the security pays, also known as its coupon rate.

If you purchase the security in the secondary market, at a price above or below par, your actual yield will be more or less than the coupon rate.

So, for example, if you have $55 in annual income on a $1,000 bond, the nominal yield is 5.5%. But if you paid $975 for the bond in the marketplace, your actual yield is 5.64%. Similarly, if you had paid $1,050, your actual yield would be 5.23%.