1. The problem is to understand what a coupon rate is in finance. 2. The coupon rate is the annual interest rate paid by the bond issuer to the bondholder. 3. It is expressed as a percentage of the bond's face value (also called par value). 4. The formula for the annual coupon payment is: $$\text{Coupon Payment} = \text{Coupon Rate} \times \text{Face Value}$$ 5. For example, if a bond has a face value of 1000 and a coupon rate of 5%, the annual coupon payment is: $$1000 \times 0.05 = 50$$ 6. This means the bondholder receives 50 units of currency each year until maturity. 7. The coupon rate does not change over the life of the bond, but the bond's market price can fluctuate. 8. Understanding the coupon rate helps investors know the fixed income they will receive from the bond.