COUPON BOND Meaning and
Definition
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A coupon bond is a type of debt security that pays periodic interest payments, typically semi-annually or annually, to bondholders until the bond's maturity date. It is also known as a bearer bond or a fixed-income security. The term "coupon" refers to the interest payment, as in the past, the bondholder would have to physically clip a coupon from the bond and present it to the issuer or paying agent to receive the interest payment. However, nowadays, the interest payments are usually made electronically.
The coupon rate, which is predetermined at the time of issuance, determines the amount of interest the bondholder will receive. This rate is applied to the bond's face value or par value to calculate the periodic interest payments. The face value represents the amount the bondholder will receive back at maturity.
Unlike zero-coupon bonds, coupon bonds have a regular payment schedule for interest, making them attractive to income-seeking investors. Investors purchase coupon bonds as a means of generating steady income during the bond's term. Upon maturity, the bond issuer repays the bondholder the face value of the bond.
Coupon bonds have the advantage of transparency regarding their interest payments, making it easier for investors to calculate their potential returns. They are typically issued by governments, municipalities, and corporations to raise capital for various projects or operational needs. Additionally, coupon bonds can be bought and sold on the open market, allowing investors to trade them before maturity if desired.
Common Misspellings for COUPON BOND
- xoupon bond
- voupon bond
- foupon bond
- doupon bond
- ciupon bond
- ckupon bond
- clupon bond
- cpupon bond
- c0upon bond
- c9upon bond
- coypon bond
- cohpon bond
- cojpon bond
- coipon bond
- co8pon bond
- co7pon bond
- couoon bond
- coulon bond
- cou-on bond
Etymology of COUPON BOND
The term coupon bond comes from the French word couper, which means to cut. In the early days of bond ownership, bondholders would receive physical certificates called bond coupons that could be detached and presented for interest payments. These coupons were literally cut from the bond certificate, hence the name coupon bond.
Similar spelling words for COUPON BOND
- zero-coupon bond,
- bond coupon.
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