Which term refers to the annual interest payment to a bondholder?

The term that refers to the annual interest payment to a bondholder is "coupon." In the context of bonds, the coupon is the periodic interest payment made to bondholders, generally expressed as a percentage of the bond's face value. This payment is typically made semiannually but can also be issued annually or at other specified intervals.

The coupon rate is a critical factor for investors, as it determines the income they can expect to receive from holding the bond until maturity. This mechanism of bond payments helps investors assess the attractiveness of the bond relative to other investment options, particularly in terms of fixed income. Understanding the concept of a coupon is essential when evaluating fixed-income securities in the primary and secondary markets.

Other terms like dividend, yield, and return relate to different concepts in finance. Dividends are payments made by a corporation to its shareholders from profits, yield typically refers to the income return on an investment expressed as a percentage of the investment's cost or current market value, and return encompasses the total gain or loss on an investment over a specific period. These distinctions highlight why "coupon" is the correct term for the annual interest payment to a bondholder.