What is the CUM coupon method?
CUM Coupon is a method of trading bonds used in the United States and many other developed countries that allow the buyer to collect further interest payment. The interest payment depends on the bond coupon rate, and therefore such a bond is reported to be traded with a coupon or coupon. When the bond is traded by the CUM coupon, the buyer must pay any accumulated interest on the previous payment of the coupon for the time of purchase to the seller. If the bond is traded without further payment of interest, it is traded by an ex dopon.
bonds use institutions to raise money while providing investors the opportunity to obtain fixed income over time. Basic bond transactions require investors to buy bonds with the main payment. During the period of bond agreement, investors also receive interest payments for a percentage known as the coupon rate. At the end of the bond term, also known as its maturity, the bond holder will receive a return. Most coupons thatThe original buyer is sold again, traded by the CUM Coupon method.
Bond is often traded with a coupon when it changes your hands on the secondary market. The secondary bond market is taking place when the original bond buyer has been selling them. New buyers will enter and pay the price to start receiving interest on bonds.
When a bond is traded on the secondary market between interest payments, the seller must receive some compensation for a time that owns a bond between previous interest payment and sales time. This amount is known as the accumulated interest and the buyer is obliged to pay this interest together with the purchase price. Most secondary market bonds are coupon bonds, which means that the buyer gains additional interest payments after paying the collected interest.
Because most bonds on the US and other major markets are traded by the CUM Coupon method, bond pricesThey reflect the knowledge that buyers on the secondary market will have another interest payment to them. There are certain bonds on the secondary market that do not give the new buyer the right to further payment of interest. These are former coupon bonds and are generally traded with a discount on their counterparts with attached coupons.