what is nominal yield 
a bond s nominal yield depicted as a percentage is calculated by dividing total interest paid annually by the face or par value of the bond understanding nominal yieldthe nominal yield is the coupon rate on a bond essentially it is the interest rate that the bond issuer promises to pay bond purchasers this rate is fixed and it applies to the life of the bond sometimes it s also referred to as nominal rate or coupon yield the nominal yield does not always represent the current yield because it s a percentage based on the bond s par value and not the actual price that was paid to buy that bond buyers who pay a premium that s more than the face value for a given bond will receive a lower actual rate of return ror than the nominal yield while investors who pay a discount that s less than the face value will receive a higher actual rate of return it s also worth noting that bonds with high coupon rates tend to get called first when callable because they represent the issuer s greatest liability relative to bonds with lower yields take for example a bond with a face value of 1 000 that pays the bondholder 50 in interest payments annually it would have a nominal yield of 5 50 1000 