Legal Definitions - coupon

Definition: A coupon is a certificate that is attached to a bond or other financial instrument. It can be detached and presented separately to receive a payment of a specific amount at a specific time. It is also known as an interest coupon.

Example: Let's say you own a bond that pays 5% interest annually. The bond has 10 coupons attached to it, each worth $50. You can detach one coupon and present it to the issuer to receive $50 in interest payment at the end of the year.

Explanation: This example illustrates how a coupon works. The bondholder can detach a coupon and present it to the issuer to receive a payment of a specific amount at a specific time. In this case, the payment is the interest earned on the bond, and the time is the end of the year.