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The fixed interest rate a bond pays, based on its face value.
Why It Matters
The coupon is the set interest a bond promises — a 4% coupon on a $1,000 bond pays $40 a year, usually in two installments. It never changes, which is why a bond's yield (the actual return based on its current price) can differ from its coupon once the bond trades on the market.
Key Points
- Coupon rate is fixed at issue and stays the same for the life of the bond
- Coupon is based on face value, not the price you pay
- The name comes from old paper bonds with detachable interest coupons
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What Are Bonds?
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Common Questions
The fixed interest rate a bond pays, based on its face value. The coupon is the set interest a bond promises — a 4% coupon on a $1,000 bond pays $40 a year, usually in two installments. It never changes, which is why a bond's yield (the actual return based on its current price) can differ from its coupon once the bond trades on the market.
The coupon is the set interest a bond promises — a 4% coupon on a $1,000 bond pays $40 a year, usually in two installments. It never changes, which is why a bond's yield (the actual return based on its current price) can differ from its coupon once the bond trades on the market.
Coupon rate is fixed at issue and stays the same for the life of the bond
Coupon is based on face value, not the price you pay
The name comes from old paper bonds with detachable interest coupons