What Is A Registered Coupon Bond

Definition: A coupon bond is a debt musical instrument that has detachable slips of paper that can be removed from the bond contract itself and brought to a bank or broker for involvement payments. These detachable slips of newspaper are chosen coupons and represent the interest payments due to the bondholder. Each coupon has its maturity date printed on it. When a coupon matures, the bondholder can bring it to a bank or broker and collect the interest payment.

What Does Coupon Bond Mean?

Thorough the life of the bond, the bondholder detaches the interest coupons i-by-1 on the interest dates. For example, a 5-yr bond that pays interest monthly would have 60 coupons fastened to the bodily bond certificate. As the v years passes, the bond coupons are removed and presented for payment.

At the stop of the bail life, none of the coupons will remain and the bail certificate can be turned in to the banking company or broker to collect the face value of the bond.

Example

Coupon bonds are slightly different than traditional bonds considering the interest paid to bondholders is non deductible for income tax purposes past the issuer. The IRS realizes that some bondholders might not turn in their interest slips or merits them as income on their personal returns. Thus, they don't allow the issuing company deduct this equally an expense on the company tax return.

Also, coupon bonds are often bearer bonds. This ways that there is no registered owner listed on the bail. Just like cash, the owner of the physical certificate is the legal owner of the bond. Issuers don't go along records of the original owners and bondholders are non protected against theft. Anyone who has possession of the certificate tin turn in the coupons and demand payment from the depository financial institution or broker.

Since nigh bonds are not physically printed and the actual bondholder never even sees the bond certificate, physical coupon bonds are less common today.