What Is a Coupon Bond? A coupon bond, also referred to as a bearer bond or bond coupon, is a debt obligation with coupons attached that represent semiannual interest payments. With coupon bonds, there are no records of the purchaser kept by the issuer; the purchaser’s name is also not printed on any kind of
What Is Coupon Stripping? Coupon stripping is the separation of a straight bond’s periodic interest payments from its principal repayment obligation to create a series of individual securities. In coupon stripping, the underlying bond becomes a zero-coupon bond known as a strip bond and each interest payment becomes its own separate zero-coupon bond. Key Takeaways
What Is Covariance? Covariance measures the directional relationship between the returns on two assets. A positive covariance means asset returns move together, while a negative covariance means they move inversely. Covariance is calculated by analyzing at-return surprises (standard deviations from the expected return) or multiplying the correlation between the two random variables by the standard deviation of each
What Is a Covenant? In its broadest sense, a covenant is a promise, agreement, or contract between two parties. As part of the covenant, the two parties agree that certain activities will or will not be carried out. Covenants in finance most often relate to terms in a financial contract, such as a loan document
What Is a Covenant-Lite Loan? A covenant-lite loan is a type of financing that is issued with fewer restrictions on the borrower and fewer protections for the lender. By contrast, traditional loans generally have protective covenants built into the contract for the safety of the lender, including financial maintenance tests that measure the debt-service capabilities of
What is Covenant Not To Execute A covenant not to execute is a lawsuit agreement in which the plaintiff agrees not to execute a judgment against the defendant. A covenant not to execute in an insurance claim lawsuit is typically provided by a plaintiff who wants to seek a portion of the overall damages from the
What Is a Coverage Ratio? A coverage ratio, broadly, is a metric intended to measure a company’s ability to service its debt and meet its financial obligations, such as interest payments or dividends. The higher the coverage ratio, the easier it should be to make interest payments on its debt or pay dividends. The trend
What is a Coverage Trigger? A coverage trigger is an event that must occur in order for a liability policy to apply to a loss. Coverage triggers are outlined in the policy language, and courts will use different legal theories pertaining to triggers to determine whether policy coverage applies. Key Takeaways A coverage trigger is outlined
What Is a Coverdell Education Savings Account (ESA)? A Coverdell Education Savings Account is a tax-deferred trust account created by the U.S. government to assist families in funding educational expenses for beneficiaries who must be under the age of 18 when the account is established. The age restriction may be waived for special needs beneficiaries.
What Is the Cost Approach? The cost approach is a real estate valuation method that estimates the price a buyer should pay for a piece of property is equal the cost to build an equivalent building. In the cost approach, the property’s value is equal to the cost of land, plus total costs of construction
