Zero coupon bonds

21 January 2014

 

A zero coupon bond does not pay coupon payments but instead pays one lump sum at maturity equal to the initial investment plus the imputed interest. Investors buy zero coupon bonds at a significant discount from their face value. For example a zero coupon bond with a face value of $100,000 and a maturity of 10 years might be bought for $50,000. At maturity the investor receives the face value....

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