Coupon (redirected from Coupons)

Coupon

The contractual interest obligation a bond or debenture issuer covenants to pay to its debtholders.

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Coupon

The interest paid on a bond. That is, the coupon is the amount that the issuer must pay to the holder of each bond in exchange for investing in that bond. Coupons usually are paid every six months. They are called coupons because formerly they were represented by physical coupons on the bond certificate that had to be clipped and returned to the issuer to receive the interest payment. With the advent of computers, this has become much less common.

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coupon

1. The annual interest paid on a debt security. A coupon is usually stated in terms of the rate paid on a bond's face value. For example, a 9% coupon, $1,000 principal amount bond would pay its owner $90 in interest annually. A coupon is set at the time a security is issued and, for most bonds, stays the same until maturity.

2. The detachable part of a coupon bond that must be presented for payment every six months in order to receive interest. See also clip, coupon clipping.

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Coupon. Originally, bonds were issued with coupons, which you clipped and presented to the issuer or the issuer's agent -- typically a bank or brokerage firm -- to receive interest payments.

Bonds with coupons are also known as bearer bonds because the bearer of the coupon is entitled to the interest.

Although most new bonds are electronically registered rather than issued in certificate form, the term coupon has stuck as a synonym for interest in phrases like the coupon rate.

When interest accumulates rather than being paid during the bond's term, the bond is known as a zero coupon.

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Coupon

What Does Coupon Mean?

The interest rate stated on a bond when it is issued. The coupon typically is paid semiannually. This also is referred to as the coupon rate or coupon percent rate.

Investopedia explains Coupon

For example, a $1,000 bond with a coupon of 7% will pay $70 a year. It is called a coupon because some bonds literally have coupons attached to them. Holders receive interest by stripping off the coupons and redeeming them. This is less common today as more records are kept electronically.

Related Terms:
• Bond
• Interest Rate
• Premium
• Yield
• Zero-Coupon Bond