I'm trying to understand how bonds work and am confused by coupon rate vs market yield rate.
Suppose company Foo issues a bond with a face value of $1 million, a 4% annual coupon rate payable semi-annually (so I believe a 2% semi-annual rate), a maturity of 5 years, and a market yield rate of 6% (which is 3% semiannual).
In that case, from company Foo's perspective, how much is it paying every 6 months - is that determined by the coupon rate? (and not the market rate)?
If so, what does the market rate mean? At first, I thought that the market rate was a constantly changing rate based on current interest rates, but the market rate in this context seems to remain constant throughout the lifetime of a bond. Does this relate to how the bond is initially issued at a discount?