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Coupon payments |
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Coupon payments Coupon payments Annual interest paid on a bond, usually in semi-annual tranches. Coupon payments are expressed as a percentage of the face value (par) of a bond. For example, if one holds a bond worth $100,000 at 5% interest, the bondholder will receive $5,000 in coupon payments per year (or, more strictly, $2,500 every six months) until the bond matures or he/she sells the bond. How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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Hence, to incorporate coupon payments into the model, we impose a jump condition: The negative adjustments to principal as the inflation index declines over the last two years, on the other hand, would have just the opposite effect; the holder receives more in the form of coupon payments than he or she would report as taxable income for each of those years (the $10,124 net increase in the principal amount payable at maturity would have been reported as income in prior years, and the $100,000 face amount would represent a tax-free return of capital). Investors who prefer a single future payment rather than a stream of coupon payments may instead hold STRIPS, described in the box "The Treasury STRIPS Market. |
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