Most bonds use simple interest, meaning the interest is not automatically reinvested. Expressed as a percentage of the face value of the bond, it is known as a coupon payment. For example ...

Note that the example above is exactly the same as the example for simple interest, but the answers are different as compound interest changes the amount each period.

Note that the example above is exactly the same as the example for simple interest, but the answers are different as compound interest changes the amount each period.