Coupon

A certificate that accompanies a bond that indicates the amount of interest it pays and the date it is due. The interest is expressed as an annual percentage of the par value of the bond, and may be paid monthly, quarterly, semi-annually, annually, or at maturity. The certificate must be presented for payment either physically or electronically.

Originally, bonds were issued with coupons, which you clipped and presented to the issuer or the issuer's agent - typically a bank or brokerage firm - to receive interest payments.

Bonds with coupons are also known as bearer bonds because the bearer of the coupon is entitled to the interest.

Although most new bonds are electronically registered rather than issued in certificate form, the term coupon has stuck as a synonym for interest in phrases like the coupon rate.

When interest accumulates rather than being paid during the bond's term, the bond is known as a zero coupon.