zero coupon bond

zero coupon bond
A type of debt security that does not pay periodic interest. Zero coupon securities are bought and sold at prices that are less than the par value of the securities. The discount, or difference between the principal paid to purchase the security and the principal returned at maturity, constitutes the investor's return. American Banker Glossary
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See deep discount bonds. Dresdner Kleinwort Wasserstein financial glossary
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Bonds issued at a deep discount which do not receive any income until they mature. Financial Services Glossary
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Zeros are securities that do not pay interest during their terms but are sold at a discount from their face value. A zero coupon bond generally increases in value as it approaches maturity, and the return comes solely from its appreciation. The dollar amount difference between the purchase price and the maturity value represents the yield or accretion value. Maturities range from 1 to 30 years. NYSE Euronext Glossary

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   A bond that pays no coupon but is issued at a deep discount to face value. The difference between the issue and redemption prices creates a hefty capital gain that boosts the effective yield close to market levels. As it does not pay a coupon, investors do not run the risk of reinvesting interest paid at a lower rate if interest rates fall during the life of the bond. There may also be tax advantages to an investor from taking a one-off capital gain rather than a stream of income from coupon payments.

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zero coupon bond UK US noun [C]
► (also zero) FINANCE a type of bond that does not pay interest, but that you buy for less than its face value , so that you make a profit when it is paid back: »

Zero coupon bonds are more sensitive to interest rate changes than bonds that pay interest periodically.

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Most zeros are still offering returns of over 8%.


Financial and business terms. 2012.

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Look at other dictionaries:

  • zero–coupon bond — see bond 2 Merriam Webster’s Dictionary of Law. Merriam Webster. 1996 …   Law dictionary

  • Zero-coupon bond — Financial markets Public market Exchange Securities Bond market Fixed income Corporate bond Government bond Municipal bond …   Wikipedia

  • zero coupon bond — noun a bond that is issued at a deep discount from its value at maturity and pays no interest during the life of the bond; the commonest form of zero coupon security • Syn: ↑zero coupon bond • Topics: ↑corporation, ↑corp, ↑government, ↑governing …   Useful english dictionary

  • zero-coupon bond — noun a bond that is issued at a deep discount from its value at maturity and pays no interest during the life of the bond; the commonest form of zero coupon security • Syn: ↑zero coupon bond • Topics: ↑corporation, ↑corp, ↑government, ↑governing …   Useful english dictionary

  • Zero coupon bond — Such a debt security pays an investor no interest. It is sold at a discount to its face price and matures in one year or longer. The New York Times Financial Glossary * * *    A bond that pays no coupon but is issued at a deep discount to face… …   Financial and business terms

  • zero-coupon bond — A type of debt security that does not pay periodic interest. Zero coupon securities are bought and sold at prices that are less than the par value of the securities. The discount, or difference between the principal paid to purchase the security… …   Financial and business terms

  • Zero-coupon bond — A bond in which no periodic coupon is paid over the life of the contract. Instead, both the principal and the interest are paid at the maturity date. The New York Times Financial Glossary * * * zero coupon bond zero coupon bond ➔ bond …   Financial and business terms

  • Zero-Coupon Bond — A debt security that doesn t pay interest (a coupon) but is traded at a deep discount, rendering profit at maturity when the bond is redeemed for its full face value. Also known as an accrual bond . Some zero coupon bonds are issued as such,… …   Investment dictionary

  • zero-coupon bond — A type of bond that offers no interest payments. In effect, the interest is paid at maturity in the redemption value of the bond. Investors sometimes prefer zero coupon bonds as they may confer more favourable tax treatment. See also deep… …   Big dictionary of business and management

  • zero coupon bond — A bond issued at a discount to mature at its face value; the discount is set so that no interest is paid during the life of the bond. It is the ultimate deep discount bond. See also: coupon stripping …   Accounting dictionary

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