Bond terms explained: Coupon

One of the words that you find associated with bonds the most is the word Coupon.

So just what is the coupon when it comes to bonds and what does it mean?

Well this is actually quite an easy one to understand, as it refers simply to the rate of interest that gets paid on the outstanding amount.

In different countries the convention as to when the coupon is paid out varies, but it is often every six months or perhaps quarterly.

These are usually paid gross of tax though there is the option for an investor to ask for this not to be the case if they require it so.

So simply put, you can equate the term coupon in the bond market with the rate of interest that will be paid.

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