Coupon
A bond's stated annual interest as a percent of face value.
Where it is explained in full
Bonds and Treasuries: lending money, with a price that moves. A bond is a loan you make. The interest is fixed, the price is not, and the relationship between the two confuses nearly everyone the first time.
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Words beside it
- coupon clipping
This was the old practice of physically cutting small squares off a paper bond and sending them in to receive your interest payment. Today the term just means collecting interest from a bond, even though everything is done electronically now.
- coupon rate
A coupon rate is the percentage of interest a bond pays you each year based on its face value. For example if a bond has a face value of one thousand dollars and a coupon rate of five percent, you receive fifty dollars per year in interest payments.
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