Coupon

A coupon is a payment on an bond. The term comes from detachable coupons that are in effect mini-certificates that were cashed to claim interest payments: the holder would cut the coupon off the certificate and exchange it for the cash payment.

The actual use of physical coupons is now rare, as are the bearer bonds on which they used. The term has remained in use.

The coupon rate is the nominal interest rate (the annual coupon divided by the face value). Coupon payments on certain securities (usually government bonds) may be separated from the bond to create strips.

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