Simply put: yes, you will. The beauty of a fixed-income security is that the investor can expect to receive a certain amount of cash, provided the bond or debt instrument is held until maturity (and its issuer does not default). Most bonds pay interest semi-annually, which means you receive two payments each year. So with a $1,000 bond that has a 10% semi-annual coupon, you would receive $50 (5%*$1,000) twice a year for the next 10 years.

Most investors, however, are concerned not with the coupon payment, but with the bond yield, which is a measure of the income generated by a bond, calculated as the interest divided by the price. So if your bond is selling at $1,000, or par, the coupon payment is equal to the yield, which in this case is 10%. But bond prices are affected by, among other things, the interest offered by other income-producing bonds. As such, bond prices fluctuate, and in turn, so do bond yields. You can read more about the factors affecting bond prices in the tutorials "Bond Basics" and "Advanced Bond Concepts".

To further illustrate the difference between yield and coupon payments, let's consider your $1,000 bond with a 10% coupon and its 10% yield ($100/$1,000). Now, if the market price fluctuated and valued your bond to be worth $800, your yield would now be 12.5% ($100/$800), but the $50 semi-annual coupon payments would not change. Conversely, if the bond price were to shoot up to $1,250, your yield would decrease to 8% ($100/$1,250), but again, you would still receive the same $50 semi-annual coupon payments.

  1. Do hedge funds invest in bonds?

    Hedge funds have the freedom to deploy their capital in virtually any manner. They can use leverage, invest in non-publicly ... Read Full Answer >>
  2. Do mutual funds pay dividends or interest?

    Depending on the type of investments included in the portfolio, mutual funds may pay dividends, interest, or both. Types ... Read Full Answer >>
  3. Can mutual funds only hold bonds?

    While some mutual funds include bonds in addition to other asset types, certain funds, aptly named bond funds, hold only ... Read Full Answer >>
  4. What are the risks of annuities in a recession?

    Annuities come in several forms, the two most common being fixed annuities and variable annuities. During a recession, variable ... Read Full Answer >>
  5. Are high yield bonds a good investment?

    Bonds are rated according to their risk of default by independent credit rating agencies such as Moody's, Standard & ... Read Full Answer >>
  6. Do mutual funds invest only in stocks?

    Mutual funds invest in stocks, but certain types also invest in government and corporate bonds. Stocks are subject to the ... Read Full Answer >>
Related Articles
  1. Investing

    In Search of the Rate-Proof Portfolio

    After October’s better-than-expected employment report, a December Federal Reserve (Fed) liftoff is looking more likely than it was earlier this fall.
  2. Investing

    The Pros and Cons of High-Yield Bonds

    Junk bonds are more volatile than investment-grade bonds but may provide significant advantages when analyzed in-depth.
  3. Financial Advisors

    Ditching High-Yield Bonds for Plain Vanilla Ones

    In a low-rate environment, it's tempting to go for higher yield bonds. However, you might be better off sticking with the plain vanilla ones.
  4. Bonds & Fixed Income

    What is an Indenture?

    An indenture is a legal and binding contract between a bond issuer and the bondholders.
  5. Investing

    What’s the Difference Between Duration & Maturity?

    We look at the meaning of two terms that often get confused, duration and maturity, to set the record straight.
  6. Bonds & Fixed Income

    Junk Bonds: Everything You Need To Know

    Don't be fooled by the name - junk bonds may be for you if you know how to analyze them.
  7. Investing

    Understanding High Yield Fund Performance

    For exchange traded fund, not all high-yield ETFs are the same. So, we take a look at one high yield investment in particular to set the stage for you.
  8. Savings

    Being too Safe with Your Money Could Turn Risky

    Find out why playing it safe with your retirement savings can actually turn risky, including the basics of inflation risk and interest rate risk.
  9. Mutual Funds & ETFs

    The 3 Best and Most Popular Vanguard Index Funds

    Learn about three popular Vanguard Index Funds. See how index funds provide an easy way for investors to gain exposure to the market with low costs.
  10. Mutual Funds & ETFs

    Are Vanguard ETFs a safe investment?

    Learn about safe ETF funds available from Vanguard. Learn why bond funds have low volatility, but still do have certain risks for investors.
  1. Par

    Short for "par value," par can refer to bonds, preferred stock, ...
  2. Yield To Maturity (YTM)

    The total return anticipated on a bond if the bond is held until ...
  3. Discount Bond

    A bond that is issued for less than its par (or face) value, ...
  4. Credit Rating

    An assessment of the credit worthiness of a borrower in general ...
  5. Long-Term Debt

    Long-term debt consists of loans and financial obligations lasting ...
  6. Accelerated Return Note (ARN)

    A short- to medium-term debt instrument that offers a potentially ...

You May Also Like

Hot Definitions
  1. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  2. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  3. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  4. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  5. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  6. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
Trading Center