Coupon
The fixed annual interest payment made by a bond issuer to the bondholder, expressed as a percentage of face value.
The coupon is the stated interest rate on a bond, set at issuance and typically paid semi-annually (twice per year) in the U.S. market. If a $1,000 bond has a 5% coupon, it pays $50 per year — $25 every six months.
The coupon rate is fixed for the life of the bond (for standard fixed-rate bonds). What changes with market conditions is the yield, not the coupon. A bond trading above par (at a premium) delivers a yield lower than its coupon; a bond below par delivers a yield higher than its coupon.
Zero-coupon bonds pay no periodic interest — the investor's return comes entirely from buying at a discount and receiving face value at maturity.
Example
A 10-year corporate bond with a 6% coupon on $1,000 face value pays $30 every six months. Over 10 years, that's $600 in coupon income plus the $1,000 principal return.
Related Terms
Accrued Interest
The coupon interest earned on a bond since the last payment date, owed by the buyer to the seller when a bond is purchased between coupon dates.
IntermediateBond
A debt instrument in which the issuer borrows money from the buyer and promises to pay periodic interest plus return the principal at maturity.
BeginnerBond Yield
The return an investor earns by holding a bond — driven by its price, coupon, and time to maturity. Moves inversely with price.
BeginnerCurrent Yield
A bond's annual coupon payment divided by its current market price — a simple but incomplete measure of yield that ignores capital gain or loss.
IntermediateFace Value (Par)
The nominal value of a bond that the issuer promises to repay at maturity — typically $1,000 for U.S. bonds.
BeginnerMaturity
The date on which a bond's principal must be fully repaid to the bondholder, ending the life of the debt instrument.
BeginnerYield to Maturity
The total annualized return an investor earns if they hold a bond to maturity — accounting for coupon payments, price paid, and time remaining.
IntermediateZero-Coupon Bond
A bond that pays no periodic coupon, sold at a discount to face value; the entire return is the gap between purchase price and par at maturity.
Intermediate