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.



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RELATED FAQS
  1. How does a bond's coupon rate affect its price?

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  3. Why do bond coupon rates vary so greatly?

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  4. How do debit spreads impact the trading of options?

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  5. If I buy a $1,000 bond with a coupon of 10% and a maturity in 10 years, will I receive ...

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