Coupon

The word coupon, in finance, is use to denote the nominal value of a bond.

Example: If you buy a CHF 1000 bond with a 5% coupon, you will receive CHF 50 in annual yields. Returns are usually broken down into several payments per year. In this example, if your bond paid out coupon yields twice a year, you would receive two payments of CHF 25 every year.

In the past, paper securities included a section which served as a coupon. This could be cut out and exchanged for cash. Hence the term “coupon” referred to yields earned from bonds. Today, an increasing number of securities are stored electronically.

More on this topic:
What is a bond / obligation?
How to trade bonds

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