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Name University Course Tutor Date Nature and Pricing of Security Opinion In calculating and understanding the nature and pricing of securities such as notes , bonds or other securities with fixed incomes , coupon payment is not synonymous to coupon rate however the latter means the same as a coupon yield Justification A security coupon rate , also referred to as the nominal rate , for example a bond coupon , is the annually paid interest amount paid by the issuer of the security to the holder of the security . Coupon
rate is usually expressed as a face value percentage of the bond . This interest is determined by a number of factors such as the issuer 's creditworthiness and the interest rate that is prevailing . The nominal yield , under normal circumstance , is paid twice a year . Furthermore current interest rates can be realized and these differ from the nominal rates (Brown , 2010 . On the other hand , coupon payment refers to the lender 's remuneration and it is regularly paid throughout the security 's life . It is simply the security 's interest payments . Coupon payment also known as the nominal amount , is obtained by multiplying the principal amount of the security with the coupon rate . The issuer of the bond has the mandate to specify the terms that are there for the issued bond or any other income fixed security . For instance , whether the coupon rate is to be paid in one coupon payment or the entire coupon rate will be distributed throughout the year in...
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