Coupon (Bond)
The interest rate stated on a bond, paid to bondholders periodically.
Detailed Description
Coupon (Bond)
What is a coupon in the context of bonds?
A coupon refers to the interest payment that the bondholder receives from the bond issuer, expressed as a percentage of the bond's face value.
What are the different types of coupons?
The common types of coupons include fixed-rate, floating-rate, zero-coupon, and step-up coupons.
How do interest rates affect bond coupons?
When market interest rates rise, existing bonds with lower coupon rates may decline in price, while higher coupon rates become more valuable when interest rates fall.
What is the difference between coupon rate and yield?
The coupon rate is the annual interest payment as a percentage of the bond's face value, while yield refers to the expected return if the bond is held to maturity.
Are coupon payments taxable?
Yes, coupon payments are generally considered taxable income, although certain bonds, like municipal bonds, may offer tax advantages.