coupon
noun
, ˈkyü-
\
Definition of coupon
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Examples of coupon in a Sentence
Recent Examples on the Web
Lands's End: 20% off your order Lands' End is always coming in clutch with the coupons. — Isabelle Kagan, USA TODAY, "The best Labor Day sales already happening on clothes, shoes, and more," 26 Aug. 2019 Juan Carlos Gil, who is legally blind, was unable to access the coupons on the store’s website. — Jason Mckee, WIRED, "Domino's and the Web are Failing the Disabled," 16 Aug. 2019 Yahoo’s software can even remind you when the coupon is about to expire. — Ian Bogost, The Atlantic, "Work Ruined Email," 2 Aug. 2019 The same coupons will be available at Story Hill BKC on Aug. 13. — Jordyn Noennig, Milwaukee Journal Sentinel, "Story Hill BKC makes Thrillist's list of top U.S. brunch places ahead of the restaurant's fifth birthday," 30 July 2019 Shoppers should clip the $4-off coupon and then apply promo code UVL2GRUA to lower the price on this waterproof speaker. — CBS News, "Amazon Prime Day 2019: Best deals on day 2 of Prime Day," 16 July 2019 Make sure to check the coupon box below the price in order to get the discount. — Wired Staff, WIRED, "The Best Back-to-School Sales on Laptops, Speakers, and More," 17 Aug. 2019 Prizes for the winners are donated by Century Ford, Challedon Golf, Youth Play, Mount Airy Lanes Bowling, coupons from Jimmie Cone, Jessica’s Snowballs, California Tortilla, and other local businesses. — Akira Kyles, baltimoresun.com/maryland/carroll, "Mount Airy Main Street Association wants you to build your best castle — out of cardboard," 13 Aug. 2019 School supplies Office Depot—Find backpacks for as low as $10 (while supplies last), and clip the coupon at the top of the page to save 20% on school and office supplies. — Samantha Gordon, USA TODAY, "It's time to start back-to-school shopping—these are the best deals and sales so far," 10 Aug. 2019These example sentences are selected automatically from various online news sources to reflect current usage of the word 'coupon.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.
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More Definitions for coupon
coupon
nounFinancial Definition of coupon
What It Is
In the finance world, a coupon is the annual interest paid on the face value of a bond. It is expressed as a percentage.
How It Works
The term "coupon" comes from the small detachable coupons attached to bearer bond certificates. The coupons entitled the holder to interest payments from the borrower. Coupons are rare today because most bonds are not issued in certificate form; rather, they are registered electronically (although some bondholders still choose to hold paper certificates).
Let's assume you purchase a $1,000 XYZ Company bond. The coupon rate on the bond is 5%, which means the issuer will pay you 5% interest per year, or $50, on the face value of the bond ($1,000 x 0.05). Even if your bond trades for less than $1,000 (or more than $1,000), the issuer is still responsible for paying the coupon based on the face value of the bond.
American and Japanese issuers typically make coupon payments every six months. So, in the example above, XYZ Company would pay you $25 twice a year. European issuers generally make coupon payments once per year.
Not all coupon rates stay the same over the life of a bond. Some issuers may pay interest based on a stated margin over a financial index such as the London Interbank Offered Rate (LIBOR). These floating-rate bonds typically reset their coupon rates every six months.
Not all bonds have a coupon, as is the case with zero-coupon bonds. Instead of making interest payments, companies may issue bonds at deep discounts and then pay the holder the full face value of the bond upon maturity. For example, instead of purchasing that XYZ Company bond for $1,000 and then collecting 5% interest each year, you could purchase a XYZ Company zero-coupon bond for $750, hold the bond until maturity, and receive $1,000 in return (for interest of $250). In both cases, the investor receives interest, but the zero-coupon bond investor does not receive interest until the bond matures. Note that zero-coupon issuers do not have to allocate cash to debt service (i.e., make interest payments) until their bonds mature.
Companies involved in leveraged buyouts or other transactions that result in a high level of interest burden may issue deferred-coupon bonds, whereby the issuer can avoid making far payments for a specified amount of time.
Why It Matters
Coupons are one of the defining characteristics of bonds and one of the most influential on their pricing because they give investors a way to compare bonds. For instance, the 5% coupon on the XYZ Company bond may make the bond an attractive investment if similar investments are only paying 2%. Likewise, the XYZ Company bond may not be attractive if similar investments pay 10%.
With higher interest rates, a better yield can be found other places than with bonds. This is why bond prices usually fall when interest rates increase and rise when interest rates fall. Notably, the size of a bond's coupon tends to indicate how sensitive the bond's price will be to interest rate changes. In general, the higher the coupon rate, the less the price will change when interest rates fluctuate.
Source: Investing Answers
coupon
noun
English Language Learners Definition of coupon
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coupon
noun
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Kids Definition of coupon
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coupon
noun
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