What is an 'Income Bond'

An income bond is a type of debt security in which only the face value of the bond is promised to be paid to the investor, with any coupon payments being paid only if the issuing company has enough earnings to pay for the coupon payment.

BREAKING DOWN 'Income Bond'

The income bond is a somewhat rare financial instrument which generally serves a corporate purpose similar to that of preferred shares. It may be structured so that unpaid interest payments accumulate and become due upon maturity of the bond issue, but this is usually not the case; as such, it can be a useful tool to help a corporation avoid bankruptcy during times of poor financial health or ongoing reorganization.



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. Zero-Coupon Bond

    A debt security that doesn't pay interest (a coupon) but is traded ...
  4. Short Coupon

    A payment made on a bond within a shorter time interval than ...
  5. Coupon

    The annual interest rate paid on a bond, expressed as a percentage ...
  6. Current Coupon Bond

    A bond with a coupon rate that is within 0.5\% of the current ...
Related Articles
  1. Investing

    Comparing Yield To Maturity And The Coupon Rate

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

    What is a "Coupon"?

    In the financial world, “coupon” represents the interest rate on a bond.
  3. Investing

    Explaining the Coupon Rate

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

    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.
  5. Investing

    How Does A Bond’s Coupon Interest Rate Affect Its Price?

    All bonds come with a coupon interest rate, which is the fixed annual interest a bond pays.
  6. Financial Advisor

    Simple Math for Fixed-Coupon Corporate Bonds

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

    Risks To Consider Before Investing In Bonds

    Make sure you understand the risks associated with bonds before making an investment decision.
  8. Investing

    Corporate Bonds: Advantages and Disadvantages

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

    What is a Premium Bond?

    A premium bond is one that trades above its face or nominal amount.
  10. Investing

    Understanding Bond Prices and Yields

    Understanding this relationship can help an investor in any market.
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. 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 >>
  4. Why do bond coupon rates vary so greatly?

    Learn about the two major reasons that cause bond coupon rates to vary so dramatically and what role coupons play in the ... Read Answer >>
  5. 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 >>
  6. How do debit spreads impact the trading of options?

    Find out what it means when a bond has a coupon rate of zero and how a bond's coupon rate and par value affect its selling ... Read Answer >>
Hot Definitions
  1. Federal Direct Loan Program

    A program that provides low-interest loans to postsecondary students and their parents. The William D. Ford Federal Direct ...
  2. Cash Flow

    The net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's ...
  3. PLUS Loan

    A low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, ...
  4. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  5. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  6. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
Trading Center