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  • The coupon rate is the interest rate that the issuer of a bond or other debt security promises to pay during the term of a loan. For example, a bond that is paying 6% annual interest has a coupon rate of 6%.

    The term is derived from the practice, now discontinued, of issuing bonds with detachable coupons.

    To collect a scheduled interest payment, you presented a coupon to the issuer or the issuer's agent. Today, coupon bonds are no longer issued. Most bonds are registered, and interest is paid by check or, increasingly, by electronic transfer.

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