Coupon

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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."

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BREAKING DOWN '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.
 

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RELATED FAQS
  1. Why do bond coupon rates vary so greatly?

    There are two major reasons coupon rates vary: changes in market interest rates and the creditworthiness of the issuer. Newly ... Read Full Answer >>
  2. How does an investor make money on a zero coupon bond?

    An investor makes money on a zero-coupon bond by being paid interest upon maturity. Also known as a discount bond, a zero-coupon ... Read Full Answer >>
  3. How do I convert a spot rate to a forward rate?

    Think of the relationship between spot and forward rates in the same way as the relationship between discounted present value ... Read Full Answer >>
  4. What is the difference between the cost of capital and required return?

    The required rate of return, often referred to as required return or RRR, and cost of capital can vary in scope, perspective ... Read Full Answer >>
  5. What is the difference between the yield of stock and the yield of a bond?

    Yield is a term frequently used in the area of investing but often not completely understood by individual investors. The ... Read Full Answer >>
  6. Can a church issue a bond?

    The North American Securities Administrators Association (NASAA) has acknowledged that "church bonds" are allowed to be issued ... Read Full Answer >>
  7. What is the difference between a zero-coupon bond and a regular bond?

    The difference between a zero-coupon bond and a regular bond is that a zero-coupon bond does not pay coupons, or interest ... Read Full Answer >>
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    Most bonds typically make periodic payments, known as coupon payments, to the bondholder. A bond's indenture, which will ... Read Full Answer >>
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    Simply put: yes, you will. The beauty of a fixed-income security is that the investor can expect to receive a certain amount ... Read Full Answer >>
  11. How does an investor make money on bonds?

    Bonds are part of the family of investments known as fixed-income securities. These securities are debt obligations, meaning ... Read Full Answer >>
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    A day-count convention is a system used in the bond markets to determine the number of days between two coupon dates. This ... Read Full Answer >>

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