Coupon Bond

The term coupon goes back to when bonds were issued as a bearer certificate. The possession of the certificate gave you proof of ownership. There could be coupons attached to the bond with set interest payments printed on the certificate. You could redeem the coupon on set dates and get paid the interest amount. this is known as "clipping the coupon".

So a coupon bond is also the coupon rate of a bond which is the amount of interest paid per year. This interest is expressed as a percentage of the face value of the bond.

A commonly known example of a coupon bond is if you had a $1,000 nominal of a bond shown as a 4.5% loan stock then you will receive $45 interest each year.

Zero-coupon bonds are those which do not pay interest. These bonds are sold at the initial offering to investors at a price less than the par value.If held to maturity, the bond is redeemed for par value.

Talk to your accountant or financial services representative about purchasing these bonds. Your portfolio needs are individually assessed. At different stages of your life the type of investment product you look for will change, whether it be life insurance or GICs. Take control and know what and why you are investing.