Did you know there are some coupons that pay you cash? Now don’t all rush to get your scissors cause these aren’t your ordinary coupons. These are actually a different type of coupon and you can only get them by paying a little upfront.
How bonds work: When Company A wants to borrow money it issues debt, otherwise known as a bond. The guy who decides to buy the bond, let’s call him James, is the bondholder. The bondholder gives Company A a lump sum of money and Company A gives James a piece of paper. This piece of paper promises James that in a certain amount of time he will get his money back and in the meantime he will receive small payments of interest. The small amounts of interest are called the coupon, and they are called that because, in the past, the bondholder had to clip the coupon (off of the bigger piece of paper that held the bond information) in order to get the interest payment.
So for all of you financially successful students who are interested in receiving cash every month or every quarter or even semi-annually then look for bonds that have a coupon payment. And start clipping coupons!
Photo Credits: http://beginnersinvest.about.com/od/bondbasic1/tp/New-Investors-Guide-To-Investing-In-Bonds.htm
About LaTisha
Very interesting trivia on why coupons were called coupons!