Which bonds have interest payment coupons attached, which are presented to the issuer to obtain payments of interest?

Question

Options

• AGeneral
• BDiscounted
• CBearer
• DNominal

• A
  8% (3)
• B
  15% (6)
• C
  75% (30)
• D
  3% (1)

Explanation

Bearer bonds are the correct answer because they are issued without the owner's name registered anywhere - whoever physically "bears" (holds) the certificate is considered the owner. Historically, these bonds came with detachable coupons that the holder would clip and present to the issuer or a bank to collect each interest payment, which is the literal origin of the term "coupon rate."

Why the distractors are wrong:

• General (A): Refers to "general obligation" bonds, a type of municipal bond backed by taxing authority - not a bond format defined by physical coupons.
• Discounted (B): Discounted bonds (like zero-coupon bonds) are sold below face value and pay no periodic interest at all; there are no coupons to clip.
• Nominal (D): "Nominal" describes the face/par value of a bond or the stated interest rate - it's not a bond category with any specific payment mechanism.

Memory tip: Think "Bearer = Clip and Carry" - the bearer physically carries the bond and clips the coupon. No name on the bond means no registration; you simply present the coupon, you get paid.

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