Nominal Yield

Nominal yield—also known as the coupon rate—is the annual interest rate stated on a bond, expressed as a percentage of the bond's face value. It represents the fixed periodic cash payment the bondholder receives each year relative to the par value of the instrument. For example, a bond with a face value of ₹1,000 and a nominal yield of 8% pays ₹80 in interest annually. The nominal yield does not reflect the bond's actual return to an investor who purchases it in the secondary market at a price different from its face value—for that, the current yield or yield to maturity provides a more accurate measure of the bond's effective return.