The Coupon refers to the actual interest payment made on each bond. If you have a $5,000 bond paying 7 percent interest, you will receive $350 each year, most likely in two $175 payments. The $350 is the coupon. The interest rate of the bond is also referred to as the coupon rate. The name originates from how you used to collect your interest (and still do on some). You’d actually clip a coupon and bring it in to receive your interest. Today, this is often done electronically, with the interest simply deposited in your bank account.