Coupon payment

Definition

A coupon payment is the periodic interest payment made to bondholders during the life of the bond. It is usually expressed as a percentage of the face value of the bond.

5 Must Know Facts For Your Next Test

1. Coupon payments are typically made semi-annually, annually, or quarterly.
2. The coupon rate is fixed at issuance and does not change over the life of the bond.
3. The total annual coupon payment can be calculated by multiplying the face value of the bond by the coupon rate.
4. Coupon payments provide regular income to investors and are a key reason for investing in bonds.
5. A zero-coupon bond does not make periodic coupon payments; instead, it is sold at a discount and pays its face value at maturity.

Review Questions

• How often are coupon payments generally made?
• What determines the amount of each coupon payment?
• What is a zero-coupon bond?

Related terms

Face Value:

The principal amount of a bond that is repaid at maturity.

Coupon Rate:

The annual interest rate paid on a bond's face value.

Maturity Date:

The date on which the principal amount of a bond is to be paid in full.