Coupon rates are fixed at the time of issue
The duration of a zero coupon bond equals the term to maturity of the bond. (T) 17. The duration of a coupon bond must be shorter than its term to maturity. (F) 18. If the coupon rate equals the market rate, a bond is likely to be selling at a discount. (F) 19. The coupon rate varies inversely with bond prices. (F) 20. The coupon rate is calculated on the bond’s face value (or par value), not on the issue price or market value. For example, if you have a 10-year- Rs 2,000 bond with a coupon rate of 10 per cent, you will get Rs 200 every year for 10 years, no matter what happens to the bond price in the market. Thus the interest rate on these pieces of paper was called the coupon rate. This rate is the amount of interest the bondholder receives based on the bond’s nominal value. Fixed rate bonds pay a fixed interest rate, which does not change once set at the issuance date, taking into account the interest rates at that time.