Coupon (bond)

Encyclopedia : C : CO : COU : Coupon (bond)

See also Coupon for other meanings of the same word

In finance, coupons are "attached" to bonds, either physically (as with old bonds) or electronically. Each coupon represents a predetermined payment promised to the bond-holder in return for his or her loan of money to the bond-issuer. The bond-holder is typically not the original lender, but receives this payment for effectively lending the money. The coupon rate (the amount promised per dollar of the face value of the bond) helps determine the interest rate or yield on the bond.

The phrase "coupon clipper" can refer to either a bond-owner or someone who uses coupons from newspapers.

Discount bonds are those which do not include coupons, being purchased at a value less than the par value paid out when the bond has matured.

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