Economics Bonds Questions Medium
Bond coupon payments refer to the periodic interest payments made by the issuer of a bond to the bondholder. When a company or government issues a bond, they borrow money from investors and promise to pay them back the principal amount at maturity, along with regular interest payments known as coupon payments.
The coupon payment is typically expressed as a fixed percentage of the bond's face value, also known as the coupon rate. For example, if a bond has a face value of $1,000 and a coupon rate of 5%, the bondholder will receive $50 in coupon payments annually (5% of $1,000).
These coupon payments are usually made semi-annually or annually, depending on the terms of the bond. The bondholder receives the coupon payments as a form of compensation for lending their money to the issuer. The coupon payments provide a steady stream of income to the bondholder throughout the life of the bond until it reaches maturity.
It is important to note that the coupon payments are fixed and predetermined at the time of issuance. They do not change with fluctuations in market interest rates. However, the market price of the bond may vary over time, which can affect the yield that an investor earns on their investment.
In summary, bond coupon payments are the regular interest payments made by the issuer to the bondholder, providing them with a fixed income stream throughout the life of the bond.