FINANCIAL BASICS: COUPON PAYMENT

When we speak about bonds, we use the term coupon or coupon payment to describe interest that the bondholder receives periodically. Coupons are usually paid semi-annually or annually, depending on the instrument. The main difference between loans and bonds is that bonds are tradeable. If you own a bond, you own a promise to receive a future stream of cash payments in the form of coupons and the principal at the end of the bond's term (maturity). However, you can sell that bond to find a more attractive stream of higher cash payments elsewhere.