bonds Guides

What is a Zero Coupon Bond?

A zero coupon bond is one which is bought at a lower price than its face value and is also referred to as a deep discount bond or a discount bond. The face value of such bonds is repaid at the maturity of these bonds. It does not make cyclic interest payments, or have so-called ?coupons,? therefore the term zero-coupon bond. Investors receive return from the compounded interest all paid at maturity in addition to the difference between the cut-rate price of the bond and its par (or recovery) price.