Coupon

Dictionary Says

Definition of 'Coupon'

The interest rate stated on a bond when it's issued. The coupon is typically paid semiannually.

This is also referred to as the "coupon rate" or "coupon percent rate".
Investopedia Says

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 Definitions

  • Coupon Bond

    A debt obligation with coupons attached that represent semiannual interest payments. Also known as a "bearer bond".
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  • Coupon Pass

    The purchase of treasury notes or bonds from dealers, by the Federal Reserve.
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  • Interest Rate

    The amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets. Interest rates are typically noted on an annual basis, known as the annual ...
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    • Current Coupon Bond

      A bond with a coupon rate that is within 0.5\% of the current market rate. Current coupon bonds are typically less volatile than other bonds with lower coupons because the coupon rate is ...
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    • Zero-Coupon Bond

      A debt security that doesn't pay interest (a coupon) but is traded at a deep discount, rendering profit at maturity when the bond is redeemed for its full face value. Also known as an ...
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    • Premium

      1. The total cost of an option. 2. The difference between the higher price paid for a fixed-income security and the security's face amount at issue.3. The specified amount of payment ...
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    • Roll-Down Return

      A form of return that arises when the value of a bond converges to par as maturity is approached. The size of the roll-down return varies greatly between long and short-dated bonds. ...
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    • Rate Trigger

      A sizeable decline in interest rates that may trigger or cause companies to call in bonds that otherwise pay high coupon or interest rates. Because these bonds are being called before ...
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    • Weighted Average Coupon - WAC

      The weighted-average gross interest rates of the pool of mortgages that underlie a mortgage-backed security (MBS) at the time the securities were issued. A mortgage-backed security's ...
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    • Collateralization

      The act where a borrower pledges an asset as recourse to the lender in the event that the borrower defaults on the initial loan. Collateralization of assets gives lenders a sufficient ...
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