Legal Definitions - coupon note

A coupon note is a type of promissory note that has attached interest coupons that the holder can present for payment as each coupon matures. A promissory note is a written promise by one party to pay money to another party or to bearer. It is a two-party negotiable instrument, unlike a draft which is a three-party instrument.

• Floating-rate note: A note carrying a variable interest rate that is periodically adjusted within a predetermined range, usually every six months, in relation to an index, such as Treasury bill rates.
• Balloon note: A note requiring small periodic payments but a very large final payment. The periodic payments usually cover only interest, while the final payment (the balloon payment) represents the entire principal.
• Coupon note: A note with attached interest coupons that the holder may present for payment as each coupon matures.

The examples illustrate the different types of promissory notes. A floating-rate note has a variable interest rate that changes periodically, while a balloon note has small periodic payments and a large final payment. A coupon note has attached interest coupons that the holder can present for payment as each coupon matures.