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Difference between revisions of "Coupon"
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== Par for the course == | == Par for the course == | ||
Until around 20 years ago, investors in corporate or government bonds would receive a bond certificate with detachable "coupons" that the investor could exchange with the issuer's | Until around 20 years ago, investors in corporate or government bonds would receive a bond certificate with detachable "coupons" that the investor could exchange with the issuer's trustee for their interest payment - these were called 'bearer bonds'.<ref>{{cite web|url=http://www.mysmp.com/bonds/bond-coupon.html|name=What is a "Coupon"?|org=My Stock Market Power|date=November 3, 2008}}</ref> Later came 'registered bonds', which were issued in the investor's name and automatically made coupon payments to [[investor]], while computer-based 'book-entry bonds' are now sent to the investor's financial institution and also make automatic coupon payments. | ||
Zero-coupon bonds, as their name suggests, do not pay coupons but instead sell at a deep [[discount]] to the face value of the bond, also known as the par value. The extent of this discount depends on both the prevailing market [[interest rate]] and the bond's [[maturity]], which means the the price of zero-coupon bonds is more sensitive to interest-rate changes.<ref>{{cite web|url=http://stats.oecd.org/glossary/detail.asp?ID=2957|name=Zero-coupon bonds|org=OECD|date=November 3, 2008 | Zero-coupon bonds, as their name suggests, do not pay coupons but instead sell at a deep [[discount]] to the face value of the bond, also known as the par value. The extent of this discount depends on both the prevailing market [[interest rate]] and the bond's [[maturity]], which means the the price of zero-coupon bonds is more sensitive to interest-rate changes.<ref>{{cite web|url=http://stats.oecd.org/glossary/detail.asp?ID=2957|name=Zero-coupon bonds|org=OECD|date=November 3, 2008 | ||