Coupon_(bond)

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In finance, coupons are "attached" to bonds, either physically, as with old bonds (with a stapler), or electronically. Each coupon represents a predetermined payment promised to the bond-holder in return for his or her loan of money to the bond-issuer. The bond-holder is typically not the original lender, but receives this payment for effectively lending the money. The phrase "coupon clipper" can refer to either a bond-owner or someone who uses coupons from newspapers, catalogs or advertisements.

The coupon rate, the amount promised per dollar of the face value of the bond, helps determine the interest rate or yield on the bond. Not all bonds have coupons. Zero coupon bonds are those which do not include coupons, but are sold to investors at a price less than the par value paid out when the bond has matured.

Regardless of the coupon rate, the bond will trade at a price such that its yield equals the prevailing market rate.

Example

Uncut bond coupons on 1922 Mecca Temple (NY, NY, U.S.A.) construction bond

There were 40 coupons printed on the same sheet of heavy paper as the Mecca Temple 5%s of 1944 bond itself. As a $100, twenty-year 5% bond with semi-annual payments, each coupon became worth $2.50 on the date printed on it. These coupons were never cut off the bond because the company became insolvent during the Great Depression. The building it funded was taken by the city of New York for back taxes, and renamed New York City Center. The coupons have no economic value today, except for the wallpaper securities or scripophily dealer from whom the bond was purchased, for a nominal amount.

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Fixed income · Bond · Debenture
Types of bonds by issuer	Government bond · Sovereign bond · Agency bond · Municipal bond · Corporate bond (Senior debt, Subordinated debt) · Emerging market debt
Types of bonds by payout	Fixed rate bond · Floating rate note · Zero coupon bond · Inflation-indexed bond · Commercial paper · Accrual bond · Auction rate security · High-yield debt · Convertible bond · Mortgage-backed security · Asset-backed security
Derivatives	Bond option · Credit derivative · Credit default swap · Collateralized debt obligation · Collateralized mortgage obligation
Pricing	Bond valuation · Par value · Coupon · Clean price · Dirty price · Accrued interest · Day count convention
Yield analysis	Nominal yield · Current yield · Yield to maturity  · Yield curve · Bond duration  · Bond convexity
Credit and spread analysis	Credit analysis · Credit risk · Credit spread · Yield spread · Z-spread · Option adjusted spread
Interest rate models	Short rate models · Rendleman-Bartter · Vasicek · Ho-Lee · Hull-White · Cox-Ingersoll-Ross · Chen · Heath-Jarrow-Morton · Black-Derman-Toy · Brace-Gatarek-Musiela

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