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# What Is a Stated Interest Rate?

The stated interest rate is a term used to describe the return on bonds. When a bond is issued, the stated interest rate determines how much interest will be paid based on the bond’s par value.

## Bond Issuance

When a company issues a bond, the bond is given a par value and a stated interest rate. However, the bond may be bought or sold for a different price than the par value.

## Calculation

To determine the amount a bond will pay you per year, multiply the stated interest rate by the par value. For example, if your bond has a par value of \$500 and a stated interest rate of 7 percent, you would earn \$35 per year.

## Considerations

The purchase price of a bond will increase above the par value when the market is performing poorly, because investors will be more willing to accept a lower rate of return. Conversely, when the market is performing well, the bond prices will fall, because investors will want a higher rate of return.

## Maturity

Bonds have a maturity period after which they will no longer continue to be paid the stated interest rate.

## Warning

Bonds, like other loans, are not guaranteed to be repaid. You should carefully research the company before choosing to invest in a bond issue.

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