What is a Coupon?
The coupon is the interest rate on the bond. It determines the interest or amount of money the Issuer pays you each year until the bond matures.
In general, the coupon is higher on bonds from Issuers that are considered lower quality or risky. Because investors want to get paid more for the risk the Issuer won’t be able to make payments on the bond.
The coupon is also generally higher for bonds with longer maturity dates because investors want to get paid more for loaning money over a longer period of time.
Remember, the coupon is the interest rate on the bond. So it’s the money the Issuer pays you for lending it money!