Today, your broker is more likely to deposit the payments straight into your account. YTM represents the average return of the bond over its remaining lifetime. All else held equal, bonds with higher coupon rates are more desirable for investors than those with lower coupon rates. In order to understand the coupon rate, it is important to understand fixed income securities first.
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A bond issuer decides on the coupon rate based on prevalent market interest rates, among others, at the time of the issuance. During a low interest rate environment, any time you acquire older bonds that have higher bond coupons, you will actually pay more than the bond's maturity value, leading to a guaranteed loss on the principal repayment portion that, when offset by the higher bond coupon rate results in an effective interest rate that is comparable to those being newly issued at the time.
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Regardless of the purchase price, coupon payments remain the same. Today, your broker is more likely to deposit the payments straight into your account. Value Traps vs. Partner Links. Companies involved in leveraged buyouts or other transactions that result in a high level of interest burden may issue deferred-coupon bonds, whereby the issuer can avoid making far payments for a specified amount of time.