A traditional interest bearing bond is comprised of the principal portion, which will be repaid to the holder of the bond, in full, at maturity and the interest portion of the bond, consisting of coupon payments which the holder of the bond receives at regular intervals.
All return is realized at maturity.
While interest is not paid till maturity, interest does accrue in regular intervals. For example, a bond with a face value of Rs.2,00,000 may be issued now at Rs. At maturity, the issuer promises to redeem the bond at face value. Zero-coupon bonds are popular because a set amount is scheduled to mature at a designated time. Unlike holders of coupon bonds, the holders of zero-coupon bonds do not have to worry about receiving interest and reinvesting that interest.