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What is a zero coupon bond


what is a zero coupon bond

: Addison Wesley. The Motley Fools' Bond Center for a longer, free tutorial on all things bonds-related. Treasury issue zero-coupon bonds.

For some Canadian bonds the maturity may be over 90 years. Zero coupon bonds may be long or short term investments. Although the tax loopholes were closed quickly, the bonds themselves are desirable because of their simplicity.

The Motley Fool has a molton brown promo code disclosure policy. The Motley Fool owns and recommends TD Ameritrade. Alternatively, when purchasing a zero coupon bond issued by.S. Some zero coupon bonds are inflation indexed, so the amount of money that will be paid to the bond holder is calculated to have a set amount of purchasing power rather than a set amount of money, but the majority of zero coupon bonds pay. Generally speaking, income investors like to buy bonds because of the interest they pay out in the form of semi-annual "coupons." As the name implies, however, the interest, or coupon paid on a "zero coupon bond" is zero. With an ordinary bond, as interest rates rise but you receive steady semiannual interest payments, you can use that interest cash to buy more bonds paying better interest.

Definition: A Zero Coupon Bond is a debt security that is sold at a discount and does not pay any interest payments to the bondholder.
In other words, its a bond that sells for less than its face value and does not make coupon payments or periodic interest payments during its life.
At maturity, it can then be redeemed at its face value allowing the bond holder to make a profit.
Zero-coupon bondholders gain on the difference between what they pay for the bond and the amount they will receive at maturity.

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