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Do You Know What Zero Coupon Bonds Are? |
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Answer» A zero coupon bond does not pay any coupons during the term of the bond. The bond is issued at a discount to the face value, and REDEEMED at face value. The effective interest EARNED is the DIFFERENCE between face value and the discounted issue price. A zero coupon bond with a LONG maturity is issued at a very big discount to the face value. Such BONDS are also known as deep discount bonds. A zero coupon bond does not pay any coupons during the term of the bond. The bond is issued at a discount to the face value, and redeemed at face value. The effective interest earned is the difference between face value and the discounted issue price. A zero coupon bond with a long maturity is issued at a very big discount to the face value. Such bonds are also known as deep discount bonds. |
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