Bond Interest Rate

This is the compensation that the borrower pays to the lender for providing funds and from the borrower’s point of view, it the cost of borrowing funds. Interest rate is usually applied to debt instruments and is also known as the coupon rate or nominal interest rate. Three main factors that influence the equilibrium interest rate are inflation, risk and liquidity preference among investors. Bonds with longer maturities have higher risk and offer higher interest rates and vice versa.