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Coupon (finance) In finance, a coupon is the interest payment received by a bondholder from the date of issuance until the date of maturity of a bond. [1] Coupons are normally described in terms of the "coupon rate", which is calculated by adding the sum of coupons paid per year and dividing it by the bond's face value. [2]
If Date2 is a coupon payment date, DayCountFactor is zero. DayCountFactor is also known as year fraction, abbreviated YearFrac. The coupon payment frequency. 1 = annual, 2 = semi-annual, 4 = quarterly, 12 = monthly, etc. Par value of the investment. (Also known as "face value", "nominal value" or just "par").
Amortizing loan. In banking and finance, an amortizing loan is a loan where the principal of the loan is paid down over the life of the loan (that is, amortized) according to an amortization schedule, typically through equal payments. Similarly, an amortizing bond is a bond that repays part of the principal (face value) along with the coupon ...
The circles represent the present value of the payments, with the coupon payments getting smaller the further in the future they are, and the final large payment including both the coupon payment and the final principal repayment.
Present value. In economics and finance, present value (PV), also known as present discounted value, is the value of an expected income stream determined as of the date of valuation. The present value is usually less than the future value because money has interest -earning potential, a characteristic referred to as the time value of money ...
The interest payment ("coupon payment") divided by the current price of the bond is called the current yield (this is the nominal yield multiplied by the par value and divided by the price).
The notional amount (or notional principal amount or notional value) on a financial instrument is the nominal or face amount that is used to calculate payments made on that instrument.
The annual coupon payment is 5% of $1000, or $50. The investor receives a $25 coupon payment every six months until the maturity date. In this case, $980 is the clean price of the bond. The bond price quoted to investors is $980 plus the accrued interest.