Loading the context…
Loading the context…
The interest payment or specified by a bond's terms.
Save conceptA coupon is a bond’s contractual interest payment. The coupon rate usually expresses annual interest as a percentage of the bond’s face value. A fixed-coupon bond keeps that rate unchanged under its terms, while a floating-rate bond resets according to a specified benchmark and formula. The word survives from paper bonds whose interest coupons could be detached for payment.
For a conventional fixed-rate bond, multiply face value by the annual coupon rate to obtain annual interest, then divide by the number of scheduled payments when payments are equal. Payment conventions and accrued interest matter when a bond trades between coupon dates. Some instruments, including zero-coupon bonds, do not pay periodic interest and instead rely on the difference between purchase price and redemption value.
A hypothetical bond with face value of 2,000 and a fixed 4% annual coupon pays 80 per year. If payments are equal and semiannual, each payment is 40. If someone buys that bond for 1,800 in the secondary market, the contractual annual coupon remains 80; the purchase price does not change the issuer’s coupon promise.
The coupon rate is not the bond’s current yield or yield to maturity. A market price above or below face value changes the return relative to the investment even when the coupon is fixed. A missed coupon is also distinct from a negotiated change to payment terms, so reporting should identify whether a payment was due, delayed, waived or legally altered.
JMMB plans regional sustainability bond as funding terms take shape
FosRich seeks time from bondholders as restructuring talks continue