Coupon

A coupon is the interest rate a bond pays its holder, expressed as a percentage of the bond's face value. A bond with a face value of one thousand dollars and a five percent coupon pays fifty dollars a year, typically split into two semiannual payments.

The name comes from paper bonds that once had physical coupons attached, which the holder would clip and redeem for each interest payment. The coupon is set when the bond is issued and, for a standard fixed-rate bond, does not change for the life of the bond even if market interest rates do.