coupon

noun

cou·pon | \ ˈkü-ˌpän

Definition of coupon

1 : a statement of due interest to be cut from a bearer bond when payable and presented for payment also : the interest rate of a coupon

2 : a small piece of paper that allows one to get a service or product for free or at a lower price: such as

a : one of a series of attached tickets or certificates often to be detached and presented as needed

b : a ticket or form authorizing purchases of rationed commodities

c : a certificate or similar evidence of a purchase redeemable in premiums

d : a part of a printed advertisement to be cut off to use as an order blank or inquiry form or to obtain a discount on merchandise or services

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Examples of coupon in a Sentence

Bring in this coupon for a free oil change. I'm always clipping coupons from the newspaper to use at the grocery store. The coupon is good for one free ice-cream cone. Send in this coupon for more information.

Recent Examples on the Web

Make sure to enter the coupon code MADNESS15 at checkout for an extra 15% off. — Popular Mechanics, "Grab This High-Quality Leather Travel Bag at 15% Off," 29 Mar. 2019 Firehouse Subs Score a free dessert at any participating location of Firehouse Subs on Valentine's Day by printing out this coupon and presenting it to the cashier. — Courtney Ortega, star-telegram, "Here's where to score freebies and discounts on Valentine's Day," 13 Feb. 2018 From reducing their own spends on socializing or ordering take-out, to using coupons, forgoing date nights and shopping in discount stores, the research unearthed the biggest efforts parents make in trying to bring their kids that dream trip. — Marie Haaland, Fox News, "The average American's 'dream vacation' takes just under a year to save for, study finds," 28 Sep. 2018 Insurers say the drug companies use coupons to steer consumers toward pricier meds. — Washington Post, "Out-Of-Pocket Costs Put HIV Prevention Drug Out Of Reach For Many At Risk," 11 July 2018 The crafting superstore is also offering 20% off all regular price purchases with the coupon code 2SAVE122318. — Lauren Matthews, Good Housekeeping, "The Only List of After-Christmas Sales You Need," 26 Dec. 2018 Without the goodwill of the bank, the CoCo is a zero-coupon perpetual, with all the value of wallpaper. — James Mackintosh, WSJ, "When Investing Is About the CEO’s Goodwill," 17 Feb. 2019 Fake Costco coupons were spread in October 2017, according to fact-checking site Snopes. — Mckenna Moore, Fortune, "Kroger Warns Customers to Beware Fake Online Coupons," 10 July 2018 The bond, which attracted demand in excess of €10 billion, was priced at a yield of 3.60% and had a coupon rate of 3.45%. — Emese Bartha, WSJ, "Greece Issues First Post-Bailout Bond," 29 Jan. 2019

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'coupon.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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Last Updated

8 Apr 2019

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Time Traveler for coupon

The first known use of coupon was in 1822

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More Definitions for coupon

coupon

noun

Financial Definition of coupon

What It Is

In the finance world, a coupon is the annual interest paid on the face value of a bond. It is expressed as a percentage.

How It Works

The term "coupon" comes from the small detachable coupons attached to bearer bond certificates. The coupons entitled the holder to interest payments from the borrower. Coupons are rare today because most bonds are not issued in certificate form; rather, they are registered electronically (although some bondholders still choose to hold paper certificates).

Let's assume you purchase a $1,000 XYZ Company bond. The coupon rate on the bond is 5%, which means the issuer will pay you 5% interest per year, or $50, on the face value of the bond ($1,000 x 0.05). Even if your bond trades for less than $1,000 (or more than $1,000), the issuer is still responsible for paying the coupon based on the face value of the bond.

American and Japanese issuers typically make coupon payments every six months. So, in the example above, XYZ Company would pay you $25 twice a year. European issuers generally make coupon payments once per year.

Not all coupon rates stay the same over the life of a bond. Some issuers may pay interest based on a stated margin over a financial index such as the London Interbank Offered Rate (LIBOR). These floating-rate bonds typically reset their coupon rates every six months.

Not all bonds have a coupon, as is the case with zero-coupon bonds. Instead of making interest payments, companies may issue bonds at deep discounts and then pay the holder the full face value of the bond upon maturity. For example, instead of purchasing that XYZ Company bond for $1,000 and then collecting 5% interest each year, you could purchase a XYZ Company zero-coupon bond for $750, hold the bond until maturity, and receive $1,000 in return (for interest of $250). In both cases, the investor receives interest, but the zero-coupon bond investor does not receive interest until the bond matures. Note that zero-coupon issuers do not have to allocate cash to debt service (i.e., make interest payments) until their bonds mature.

Companies involved in leveraged buyouts or other transactions that result in a high level of interest burden may issue deferred-coupon bonds, whereby the issuer can avoid making far payments for a specified amount of time.

Why It Matters

Coupons are one of the defining characteristics of bonds and one of the most influential on their pricing because they give investors a way to compare bonds. For instance, the 5% coupon on the XYZ Company bond may make the bond an attractive investment if similar investments are only paying 2%. Likewise, the XYZ Company bond may not be attractive if similar investments pay 10%.

With higher interest rates, a better yield can be found other places than with bonds. This is why bond prices usually fall when interest rates increase and rise when interest rates fall. Notably, the size of a bond's coupon tends to indicate how sensitive the bond's price will be to interest rate changes. In general, the higher the coupon rate, the less the price will change when interest rates fluctuate.

Source: Investing Answers

coupon

noun

English Language Learners Definition of coupon

: a usually small piece of printed paper that lets you get a service or product for free or at a lower price

chiefly British : a section of an advertisement that you can cut out and mail to a company in order to request information or to order a product or service

See the full definition for coupon in the English Language Learners Dictionary

coupon

noun

cou·pon | \ ˈkü-ˌpän

, ˈkyü-\

Kids Definition of coupon

1 : a ticket or form that allows the holder to receive some service, payment, or discount

2 : a part of an advertisement meant to be cut out for use as an order blank

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coupon

noun

cou·pon | \ ˈkü-ˌpän, ˈkyü-

Legal Definition of coupon

: a statement of due interest to be cut from a debt instrument and especially a bearer bond when payable and presented for payment also : the interest rate of a coupon