What is a Coupon Rate?
How Does a Coupon Rate Work?
Why Does a Coupon Rate Matter?
The term coupon rate used to have a much more literal meaning than it does today. To receive interest payments in the past, bondholders would have to clip a coupon from their physical certificate of bond ownership and take it to the bank to obtain the cash. Today, your broker is more likely to deposit the payments straight into your account. Some bonds, known as zero-coupon bonds, do not pay coupons, and instead are sold at a price less than par value.
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