what is coupon

A coupon, in the context of finance, refers to the annual interest rate paid on a bond, expressed as a percentage of the bonds face value, also known as the "coupon rate"). It is the interest payment received by a bondholder from the date of issuance until the date of maturity of a bond). Originally, the term "coupon" referred to detachable coupons affixed to bond certificates, which bondholders would present to collect interest payments). However, with the advent of electronic records, physical coupons have become rare, and the term "coupon" now primarily refers to a bonds nominal yield. The coupon rate is used to calculate other metrics such as the yield to maturity and the yield to worst. Bonds with higher coupon rates are more attractive to investors as they provide higher yields. Additionally, not all bonds have coupons; zero-coupon bonds, for example, pay no coupons and make only one payment, which is the payment of the face value on the maturity date).