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There are several terms that are commonly used by investors and issuers when dealing with bonds.
Coupon
The periodic interest payment made by the issuer.
When bonds were first developed, the bond
certificate had detachable coupons that the
investor would send to the issuer to receive each
interest payment. The term still applies to
payments, even though coupons are no longer
used to redeem them.
Coupon rate
The interest rate used to calculate the coupon
amount the bond will pay. This rate is multiplied
by the face value of the bond to arrive at the
coupon amount.
Face (par) value
The amount printed on the certificate. The face
value represents the principal in the loan
agreement, which is the amount the issuer pays at
maturity of the bond.
Maturity date
The date the loan contract ends. At this time, the
issuer pays the face value to the investor who
owns the bond.
Zero-coupon
A type of bond where the company pays no
periodic interest payments. The bond is priced at
a discount so that interest is imputed throughout
the life of the bond. At maturity, the issuer pays
the face value and the investor receives all of the
return in the form of capital gain.
Bonds are often referred to as fixed income securities because they have a fixed payout to the investor. Since the coupon rate is set before the sale of the bond, the investor knows the amount of the interest payments.