Series 7: 2.10.2. Step Coupon Bonds

2.10.2. Step Coupon Bonds

This bond starts with a lower-than-market interest rate that gradually increases over the life of the bond. The rate increases occur at specific dates and at predetermined levels, as stated in the bond indenture. Issuers usually have the right to call the bond at par on any date that the interest rate is scheduled to change. Step coupon bonds are also known as step-up bonds. Investors in step-up bonds choose to forgo some in