The regular income payable by a bond, expressed as a percentage of the nominal value, is called the:

The regular income payable by a bond, expressed as a percentage of the nominal value, is called the:

• A. Link
• B. Discount
• C. Coupon
• D. Debenture

Answer: (C)

The regular income paid by a bond as a percentage of its nominal value is the coupon. This is the fixed coupon rate used to calculate periodic coupon payments the issuer promises to make to the holder. For example, with a par value of 1,000 and a coupon rate of 5%, the annual coupon payment is 50, usually paid in two installments if the payments are semi-annual. The coupon rate stays constant over the life of the bond, while the actual return an investor earns (yield) depends on the price paid for the bond and how long it remains outstanding. The other terms aren’t describing this fixed, par-based income: discount refers to price below par, and debenture is a type of bond, not the income measure.

The regular income paid by a bond as a percentage of its nominal value is the coupon. This is the fixed coupon rate used to calculate periodic coupon payments the issuer promises to make to the holder. For example, with a par value of 1,000 and a coupon rate of 5%, the annual coupon payment is 50, usually paid in two installments if the payments are semi-annual. The coupon rate stays constant over the life of the bond, while the actual return an investor earns (yield) depends on the price paid for the bond and how long it remains outstanding. The other terms aren’t describing this fixed, par-based income: discount refers to price below par, and debenture is a type of bond, not the income measure.