A:

When you buy a regular coupon bond, you are entitled to a coupon, which is typically paid at regular intervals, and the face value of the bond (the amount you initially invested), which is typically paid upon maturity. Most coupons are paid on a semi-annual basis, but some may be paid monthly or annually.

Like stocks, bonds can be in street or bearer form, and the payment of your coupon depends on how your bond is registered. If the bond is registered in street form, the company that issued the bond will transfer the coupon payment to your broker, who will then shift the coupon payment to your account. If the bond is registered in bearer form, there are two possible ways for you to receive your money: If you are the owner of record, as documented in the bond issuer's records, the issuer will send you the coupon payments directly. If the bond has no owner of record and is freely transferable, then you will have to clip the coupon attached to the bond and send it to the bond issuer to receive the payment.

If you don't want to be receiving checks in the mail, there are two things you can do. First, you can transfer the bond to your brokerage account and have your brokerage deal with the coupon payments. When you transfer the bond, it will be taken out of bearer form, and the payments will be made in the way they are for street form bonds. Second, some companies that issue many different bonds provide the direct deposit of coupons into bank accounts. You can try to contact the company that issued your bond and find out if it provides this service.

To learn more about bonds, check out our Bond Basics and Advanced Bond Concepts.

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

    See how fixed-income security investors can expect to use coupon rates on semi-annual payments if the bond or debt instrument ... Read Answer >>
  3. What is the difference between yield to maturity and the coupon rate?

    A bond's coupon rate is the actual amount of interest income earned on the bond each year based on its face value. Read Answer >>
  4. What is accrued interest, and why do I have to pay it when I buy a bond?

    An investor who sells a bond must be compensated in coupon payments for the period they owned the bond, defined as the interest ... Read Answer >>
Related Articles
  1. Investing

    The Benefits of a Bond Portfolio

    Bonds are often viewed as stocks' less-glamorous sidekick, but they deserve more respect from investors. Learn how a fixed-income portfolio works.
  2. Personal Finance

    6 Tricks To Make Coupons Work For You

    Use these strategies to counteract the stores' and manufacturers' coupon tactics and come out ahead.
  3. Investing

    Simple Math for Fixed-Coupon Corporate Bonds

    A guide to help to understand the simple math behind fixed-coupon corporate bonds.
  4. Personal Finance

    6 Sneaky Ways Coupons Make You Spend More

    If you're hoping to save money by using coupons, watch out for sellers' strategies.
  5. Investing

    Corporate Bonds: Advantages and Disadvantages

    Corporate bonds have advantages and disadvantages. They can provide compelling returns, even in low-yield environments. But they are not without risk.
  6. Investing

    Invest in Municipal Bonds During Rate Hikes

    Discover five reasons why investing in municipal bonds when the Federal Reserve hikes interest rates can be a great way to boost investment income.
  7. Retirement

    Should I Invest in Bonds After I Retire?

    Yes, retirees should invest in bonds, but remember that not all bonds are safe investments. Seek the help of a financial advisor.
  8. Managing Wealth

    How Bond Prices and Yields Work

    Understanding bond prices and yields can help any investor in any market.
RELATED TERMS
  1. Coupon Rate

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

    A coupon is the annual interest rate paid on a bond, expressed ...
  3. Short Coupon

    A short coupon is a payment made on a bond within a shorter time ...
  4. Income Bond

    An income bond is a type of debt security in which only the face ...
  5. Zero-Coupon Bond

    A zero-coupon bond is a debt security that doesn't pay interest ...
  6. And Interest

    And interest is a slang phrase used when quoting the price of ...
Trading Center