Summarize the following:
It is typically $1,000 or a multiple of that amount. Remember that the face value is the principal amount to be paid back when the bond reaches maturity. Pretend that in this case, the face value of the bond is $1000. This means you "loaned out" $1000, and expect $1000 back at the bond's maturity. The rate is stated in the bond's paperwork. It may also be called the face, nominal or contractual interest rate. The coupon rate established when the bond was issued remains unchanged and is used to determine interest payments until the bond reaches maturity. In this case, assume the coupon is 5%. By multiplying the bond's face value by its coupon interest rate, you can figure out what the dollar amount of that interest rate is each year. For example, if the bond's face value is $1000, and the interest rate is 5%, by multiplying 5% by $1000, you can find out exactly how much money you will receive each year. Remember when multiplying a number by a percent, to convert the number to a decimal. For example, 5% would be 0.05. $1000 multiplied by 0.05 would equal $50. Therefore, your annual interest payment is $50. Interest is typically paid twice a year. This information is stated when you purchase the bond. If a bond pays interest twice a year, the annual payment would be divided by two. In this case, every six months you can expect $25. If the bond pays monthly, the exact same approach as above would be used, but the $50 would be divided by 12, since there are 12 months in a year. In this case, $50 divided by 12 is $4.16, which means you would receive $4.16 monthly. You earn the interest only for the days you own the bond. If you buy a bond between interest payments, the market price will include the interest owed to the previous owner for the days he or she held the bond.
Look at the bond's face value. Find the bond's "coupon" (interest) rate at the time it was issued. Multiply the bond's face value by the coupon interest rate. Calculate how much each bond payment is. Find the monthly interest.