Coupon Payment

A coupon payment is the interest an issuer pays to the holders of a bond on each scheduled interest date. The amount is the nominal value held multiplied by the coupon rate and by the fraction of a year covered by the interest period, which is set by the bond's day count convention. A bond with a nominal value of 1,000 and a 5% annual coupon paid twice a year pays 25 on each date.

The dates are laid out in the coupon schedule. On each one the issuer funds its paying agent, which passes the money through the depository and custodians to investors, a workflow described under bond coupon processing. A buyer between coupon dates compensates the seller for interest earned so far through bond accrued interest.