A coupon payment is like getting a little treat from a friend every now and then, it’s money you receive regularly because you lent them some cash earlier.
Imagine your friend borrows $10 from you to buy ice cream. Instead of paying you all the money back at once, they give you a tiny piece of chocolate each week as a thank-you for letting them borrow your cash. That tiny piece of chocolate is like a coupon payment, it’s part of the total amount they’ll pay you later.
How It Works
When someone lends you money, sometimes they agree to give you a little bit of money back at regular times, like every month or every year. These bits are called coupon payments. They’re kind of like the chocolate pieces in our example: small rewards that help you remember your friend is working on paying you back.
If you get these treats regularly, it helps you plan better, just like knowing when your friend will give you more chocolate makes you happy and ready for the next treat!
Examples
- A bond pays $50 every six months, that's a coupon payment.
- Like getting a regular allowance from your favorite company.
- You buy a bond for $1,000 and get $50 twice a year.
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See also
- What are bond yields?
- How The Stock Exchange Works (For Dummies)?
- How Does If You Don't Understand Bonds, You Don't Understand Money Work?
- How Does 10 Investing Trends With HUGE Return Potential Work?
- What are growth stocks?