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.[1][2]
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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.[1][3]
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.[4]
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.[4]
References
change- ↑ 1.0 1.1 The Economics of Money, Banking, and Financial Markets (Alternate ed.). New York: Addison Wesley. 2007. p. 70. ISBN 978-0-321-42177-7.
- ↑ "STRIPS". dictionary.com - financial dictionary. Retrieved 2009-10-30.
- ↑ "FRB: Finance and Economics Discussion Series: Screen Reader Version - The U.S. Teasury Yield Curve: 1961 to the Present". www.federalreserve.gov. Retrieved 2024-10-08.
- ↑ 4.0 4.1 "Zero-Coupon Bond - an overview | ScienceDirect Topics". www.sciencedirect.com. Retrieved 2024-10-08.
