Nominal yield


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Nominal yield

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

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.

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%.

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