detachable certificates showing the dollar amount of interest payable to a bond holder at regular intervals, ordinarily semiannually. Coupons on a bearer bond are negotiable instruments and are processed just like checks. Bond interest on book entry securitiesis credited to the owner's account.
printed ticket, often appearing in a magazine or newspaper, offering a product at a discount. Coupons must be presented with the purchase to claim the discount. They generally have an expiration date and frequently have terms and conditions that limit their use.
interest rate on a debt security the issuer promises to pay to the holder until maturity, expressed as an annual percentage of face value. For example, a bond with a 10% coupon will pay $10 per $100 of the face amount per year, usually in installments paid every six months. The term derives from the small detachable segment of a bond certificate which, when presented to the bond's issuer, entitles the holder to the interest due on that date. As the registered bond becomes more widespread, coupons are gradually disappearing.
fixed or stated amount of interest paid by a security expressed as a percent of the par value of the security. The longer the length of time until maturity, the higher the coupon rate to reflect the greater risk associated with a longer loan period. The higher the creditworthiness of the borrower, the lower the coupon rate. For example, United States Treasury issues have a low coupon rate because the United States has a long history of political and economic stability.
