How do interest and coupons work?

How do interest and coupons work?

A coupon is attached to a bond. It represents the interest paid to the holder of that bond, in this case the investor. Historically, bonds were printed on paper and accompanied by detachable coupons, with the payer withdrawing the corresponding coupon as soon as he made a repayment.

To illustrate, with a €1000 bond over 24 months at 10% interest rate, a coupon is 1000*10%, i.e. €100 to be multiplied by two, given that this interest rate is over 2 years. This bond therefore comes with two coupons of €100.

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Updated on: 05/04/2022