How do interest and coupons work ?

A coupon is the interest paid to the bondholder

Each bond has a coupon attached to it: this represents the interest paid periodically to the holder. The origin of the term dates back to paper bonds: historically, each security was accompanied by detachable coupons, which the issuer would remove as and when interest payments were made.

A practical example

Let’s take a €1,000 bond, at a rate of 10 per cent per annum, with a maturity of 24 months. Each annual payment date results in a coupon of: €1,000 × 10% = €100
Over a two-year term, this bond therefore generates two coupons of €100 each, paid at the end of the first and second years respectively.

A term still in use today, even in the paperless age

Although bonds are now entirely dematerialised, the term ‘coupon’ is still used in everyday financial language to refer to any interest payment linked to a bond; this is why you’ll find it in the documentation for your transactions on Raizers.

Updated on: 17/09/2026