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 per year for the next 10 years.

## Bond Yield Concerns

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 (For further reading, check out 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. ### How do I calculate yield to maturity of a zero-coupon bond?

Find out how to calculate the yield to maturity of a zero-coupon bond, and learn why this calculation is simpler than one ... Read Answer >>
2. ### Should investors focus more on the current yield or face value of a bond?

Find out when investors should focus on a bond's current yield versus its face value, including an example of how current ... Read Answer >>
3. ### Are high-yield bonds better investments than low-yield bonds?

It depends on the amount of default risk you as an investor want to be exposed to. More yield goes hand-in-hand with more ... Read Answer >>
Related Articles
1. Investing

### Simple Math for Fixed-Coupon Corporate Bonds

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

### 5 Basic Things To Know About Bonds

Learn these basic terms to breakdown this seemingly complex investment area.
3. Investing

### 3 Signs It's Time to Sell Your Bonds

Learn about three major signals that you should sell your bonds right now, including impending interest rate hikes and bond issuer instability.
RELATED TERMS
1. ### Coupon Rate

Coupon rate is the yield paid by a fixed income security, which ...
2. ### Coupon Bond

A coupon bond is a debt obligation with coupons attached that ...
3. ### Bond Valuation

Bond valuation is a technique for determining the theoretical ...
4. ### Coupon

A coupon is the annual interest rate paid on a bond, expressed ...
5. ### Effective Yield

The effective yield is the yield of a bond which has its coupons ...
6. ### Bond Discount

Bond discount is the amount by which the market price of a bond ...
Hot Definitions
1. ### Intrinsic Value

Intrinsic value is the actual value of a company or an asset based on an underlying perception of its true value including ...
2. ### Bubble

1. An economic cycle characterized by rapid expansion followed by a contraction. 2. A surge in equity prices, often more ...
3. ### Swap

A swap is a derivative contract through which two parties exchange financial instruments, such as interest rates, commodities, ...
4. ### Yield Curve

A yield curve is a line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but ...
5. ### Gross Profit

Gross profit is the profit a company makes after deducting the costs of making and selling its products, or the costs of ...
6. ### Risk Tolerance

The degree of variability in investment returns that an individual is willing to withstand. Risk tolerance is an important ...