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Coupon
Term category: Bonds
In 10 words or less: The interest rate on the bond when it is issued.

Definition: The coupon rate is the interest rate on a bond when it's issued.  So, for example, if a $1000 bond has a 10% coupon, you'd receive $100 per year in interest.

Advice: Saying a bond has a 10% coupon doesn't necessarily mean that the investor can only earn a 10% annual return.  In reality, bonds are trading at prices different than their par values.  For this reason, the Yield-to-Maturity can be considerably higher if the bond is trading for a big enough discount.

 

 

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