Accounts Executive Interview Question:

Explain stated interest rate of a bond payable?

Submitted by: Administrator

The stated interest rate of a bond payable is the annual interest rate that is printed on the face of the bond. The stated interest rate multiplied by the bond's face amount (or par amount) results in the annual amount of interest that must be paid by the issuer of the bond. For example, if a corporation issues $10,000,000 of bonds having a stated interest rate of 6%, it is promising to pay interest of $600,000 each year (usually $300,000 semiannually).
The stated interest rate of a bond payable is also known as the face interest rate, the nominal interest rate, the contractual interest rate, and the coupon interest rate.
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