What term describes the stated interest rate of a bond?

The term that describes the stated interest rate of a bond is the coupon rate. The coupon rate is the percentage of the bond's face value that is paid to bondholders as interest, typically on an annual basis. This rate is fixed at the time the bond is issued and remains the same throughout the life of the bond.

The coupon rate is significant because it determines the cash flow that an investor will receive from the bond until maturity. For example, if a bond has a face value of $1,000 and a coupon rate of 5%, bondholders will receive $50 annually until the bond matures.

The other terms provided do not define the stated interest rate of a bond. The dividend rate applies to stocks, capital gains refer to the profit made from selling an asset for more than its purchase price, and the principal rate is not a commonly used term in the context of bonds. Understanding these distinctions helps clarify the role of the coupon rate in fixed-income investments.