Zero-coupon bond

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A zero-coupon bond is a special bond, where there are no periodic interest payments. At the end of the runtime, it will be repaid at the agreed value. There may be compensation for inflation. Usually, zero coupon bonds have long runtimes.

Examples of zero-coupon bonds are US Treasury bills, US savings bonds, long-term zero-coupon bonds, and any bond that has had its interest payments removed. Zero-coupon bonds and deep discount bonds mean the same thing.

With regular bonds, investors get money from interest payments, which are made every six months or every year. They also get back the main amount of money they invested when the bond ends.

Some zero-coupon bonds are linked to inflation, so the amount paid to the bondholder keeps its buying power. Most zero-coupon bonds pay a fixed amount of money, called the face value.

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Category:Finance