Important Bond Terms o The bond's coupon rate is the stated rate of interest: the annual interest payment divided by the bonds face value n The discount rate(capitalization rate) is dependent on the risk of the bond and is composed of the risk-free rate plus a premium for risk 4-84-8 Important Bond Terms The discount rate (capitalization rate) is dependent on the risk of the bond and is composed of the risk-free rate plus a premium for risk. The bond’s coupon rate is the stated rate of interest; the annual interest payment divided by the bond’s face value