What is a 'Coupon'
A coupon is the annual interest rate paid on a bond, expressed as a percentage of the face value.
It is also referred to as the "coupon rate," "coupon percent rate" and "nominal yield."
BREAKING DOWN 'Coupon'
For example, a $1,000 bond with a coupon of 7% pays $70 a year. Typically these interest payments will be semiannual, meaning the investor will receive $35 twice a year.
Because bonds can be traded before they mature, causing their market value to fluctuate, the current yield (often referred to simply as the yield) will usually diverge from the bond's coupon or nominal yield. For example, at issue, the $1,000 bond described above yields 7%; that is, its current and nominal yields are both 7%. If the bond later trades for $900, the current yield rises to 7.8% ($70 Ã· $900). The coupon rate, however, does not change, since it is a function of the annual payments and the face value, both of which are constant.
Coupon rate or nominal yield = annual payments Ã· face value of the bond
Current yield = annual payments Ã· market value of the bond
The current yield is used to calculate other metrics, such as the yield to maturity and the yield to worst.
Coupon Bonds
The term "coupon" originally refers to actual detachable coupons affixed to bond certificates. Bonds with coupons, known as coupon bonds or bearer bonds, are not registered, meaning that possession of them constitutes ownership. To collect an interest payment, the investor has to present the physical coupon.
Bearer bonds were once common. While they still exist, they have fallen out of favor for two reasons. First, an investor whose bond is lost, stolen or damaged has functionally no recourse or hope of regaining his investment. Second, the anonymity of bearer bonds has proven attractive to money launderers. A 1982 U.S. law significantly curtailed the use of bearer bonds, and all Treasuryissued bearer bonds are now past maturity.
Today, the vast majority of investors and issuers alike prefer to keep electronic records on bond ownership. Even so, the term "coupon" has survived to describe a bond's nominal yield.

Coupon Rate
Coupon rate is the yield paid by a fixed income security, which ... 
Coupon Equivalent Yield (CEY)
The coupon equivalent yield (CEY) is used to calculate the yield ... 
Short Coupon
A short coupon is a payment made on a bond within a shorter time ... 
Cum Coupon
Cum coupon is a bond priced with the expectation that a seller ... 
Bond Valuation
Bond valuation is a technique for determining the theoretical ... 
ZeroCoupon Bond
A zerocoupon bond is a debt security that doesn't pay interest ...

Investing
Understanding Bond Prices and Yields
Understanding this relationship can help an investor in any market. 
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. 
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. 
Investing
Bearer bonds: From popular to prohibited
These coupon bonds are transferable, negotiable and anonymous â€” so why aren't they sold in the U.S.? 
Managing Wealth
How Bond Prices and Yields Work
Understanding bond prices and yields can help any investor in any market. 
Investing
The Basics Of Bonds
Bonds play an important part in your portfolio as you age; learning about them makes good financial sense. 
Investing
5 Reasons to Invest in Municipal Bonds When the Fed Hikes Rates
Discover five reasons why investing in municipal bonds after the Fed hikes interest rates, and not before, can be a great way to boost investment income.

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 >> 
What is the most common solvency ratios used in fundamental analysis?
Learn about the difference between a bond's coupon rate and its yield rate, how the coupon rate influences market price and ... Read Answer >> 
If I buy a $1,000 bond with a coupon of 10% and a maturity in 10 years, will I receive ...
See how fixedincome security investors can expect to use coupon rates on semiannual payments if the bond or debt instrument ... Read Answer >> 
How do I calculate yield to maturity of a zerocoupon bond?
Find out how to calculate the yield to maturity of a zerocoupon bond, and learn why this calculation is simpler than one ... Read Answer >> 
Learn to Calculate Yield to Maturity in MS Excel
Find out the best practices for most financial modeling to price a bonds, calculate coupon payments, then learn how to calculate ... Read Answer >>