Zero Coupon Bonds and Treasury STRIPS.  Essentials of Investments. CPA exam BAR. CFA exam
Channel: Farhat Lectures. The # 1 CPA & Accounting Courses
Date: 2020-09-16

IN this video, I discuss zero coupon bonds. Zero-coupon bonds are a debt security that does not pay interest but instead trades at a deep discount.  Zero-coupon bonds are a debt security instrument that does not pay interest
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What are a Zero-Coupon Bonds?

Some bonds are issued as zero-coupon instruments from the start, while others bonds transform into zero-coupon instruments after a financial institution strips them of their coupons, and repackages them as zero-coupon bonds. Because they offer the entire payment at maturity, zero-coupon bonds tend to fluctuate in price, much more so than coupon bonds.1


A zero-coupon bond is also known as an accrual bond.

KEY TAKEAWAYS
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Zero-coupon bonds trade at deep discounts, offering full face value (par) profits at maturity.
The difference between the purchase price of a zero-coupon bond and the par value, indicates the investor's return.