Coupon

A coupon is the interest rate a bond pays each year, stated as a percent of the bond's face value, the amount the issuer promises to repay at maturity. A bond with a $1,000 face value and a 5 percent coupon pays $50 a year, and because most bonds pay twice a year, that arrives as $25 every six months.

The coupon is set when the bond is issued and does not change, even if interest rates move or the bond's market price rises or falls. So it does not tell you what you will earn: if you buy a bond for more or less than its face value, your yield, the return measured against the price you paid, differs from the coupon rate. Payments also depend on the issuer: if it defaults, they can stop.