A:

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.

RELATED FAQS
1. What is the difference between yield to maturity and the coupon rate?

Read about some of the basic differences between a debt security's coupon rate and its yield to maturity, and learn which ... Read Answer >>
2. How does the money from the interest on my bond get to me?

When you buy a regular coupon bond, you are entitled to a coupon, which is typically paid at regular intervals, and the face ... Read Answer >>
3. How does a bond's coupon interest rate affect its price?

Find out why the difference between the coupon interest rate on a bond and prevailing market interest rates has a large impact ... Read Answer >>
4. What is the most common solvency ratios used in fundamental analysis?

Learn about the difference between a bond's coupon rate and its yield rate, how the coupon rate influences market price and ... Read Answer >>
5. How does a bond's coupon rate affect its price?

Find out how a bond's coupon rate influences its price, including the role of government-dictated interest rates and the ... Read Answer >>
6. What types of fees apply to checking accounts?

Learn about the difference between a bond's coupon rate and its yield to maturity, and how the par value, coupon rate and ... Read Answer >>
Related Articles
1. Investing

If I Buy A \$1,000 10-Year Bond With A 10% Coupon, Will I Receive \$100 Each Year?

Investors can count on a fixed-income security paying them a certain amount of cash as long as the security is held until maturity and the issuer doesnâ€™t default.
2. Investing

Comparing Yield To Maturity And The Coupon Rate

Investors base investing decisions and strategies on yield to maturity more so than coupon rates.
3. Investing

How Does A Bondâ€™s Coupon Interest Rate Affect Its Price?

All bonds come with a coupon interest rate, which is the fixed annual interest a bond pays.
4. Investing

Understanding Bond Prices and Yields

Understanding this relationship can help an investor in any market.

Simple Math for Fixed-Coupon Corporate Bonds

A guide to help to understand the simple math behind fixed-coupon corporate bonds.
6. Investing

Explaining the Coupon Rate

Coupon rate is the stated interest rate on a fixed income security.

Using Excel PV Function to compute Bonds PV

To determine the value of a bond today - for a fixed principal (par value) to be repaid in the future at any predetermined time - we can use an Excel spreadsheet.
8. Investing

Corporate bonds can provide compelling returns, even in low-yield environments. But they are not without risk.
9. Investing

Risks To Consider Before Investing In Bonds

Make sure you understand the risks associated with bonds before making an investment decision.
RELATED TERMS
1. Coupon Rate

The yield paid by a fixed income security. A fixed income security's ...
2. Coupon Bond

A debt obligation with coupons attached that represent semiannual ...
3. Bond

A debt investment in which an investor loans money to an entity ...
4. Coupon

The annual interest rate paid on a bond, expressed as a percentage ...
5. Zero-Coupon Bond

A debt security that doesn't pay interest (a coupon) but is traded ...
6. Bond Yield

The amount of return an investor will realize on a bond. Several ...
Hot Definitions
1. Co-pay

A type of insurance policy where the insured pays a specified amount of out-of-pocket expenses for health-care services such ...
2. Protectionism

Government actions and policies that restrict or restrain international trade, often done with the intent of protecting local ...
3. Fiduciary

A fiduciary is a person who acts on behalf of another person, or persons to manage assets.
4. Demonetization

Demonetization is the act of stripping a currency unit of its status as legal tender and is necessary whenever there is a ...
5. Investment

An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic ...
6. Redlining

The unethical practice whereby financial institutions make it extremely difficult or impossible for residents of poor inner-city ...