Misconception · MIS:coupon-rate-always-equals-interest-expense-rate

Mistaken idea “Coupon rate always equals the expense rate”

Mistaken reasoning: This mistake uses the stated rate for both contractual cash and effective interest expense.

Updated Aug 21, 2026 Review due Nov 8, 2026

Why this is mistaken

Coupon cash and effective expense use different rates and bases when price or net carrying amount differs from face.

Where to watch

When this mistake may appear

  • A bond is issued at a discount or premium.
Check your work

Your work may contain this mistake if:

  • Interest expense equals face times the coupon rate in every period.