Definition of Zero-coupon bond:
Some bonds are issued as zero-coupon instruments from the start, while others bonds transform into zero-coupon instruments after a financial institution strips them of their coupons, and repackages them as zero-coupon bonds. Because they offer the entire payment at maturity, zero-coupon bonds tend to fluctuate in price, much more so than coupon bonds.
Bond that (1) pays no interest but instead is sold at a deep discount on its par-value, or (2) an interest paying bond that has been stripped of its coupon which is sold separately as a security in its own right. Bondholders income is determined by the difference between the bonds redemption value on maturity and its purchase price. Also called non-interest bearing Bond, zero interest bond, or zero rated bond. See also deep discount bond.
A zero-coupon bond is a debt security that does not pay interest but instead trades at a deep discount, rendering a profit at maturity, when the bond is redeemed for its full face value.
A bond that is issued at a deep discount to its face value but pays no interest.
How to use Zero-coupon bond in a sentence?
- I realized that a zero-coupon bond would be a good choice, so I decided to go for it and it ended up paying off.
- Zero-coupon bonds trade at deep discounts, offering full face value (par) profits at maturity.
- The difference between the purchase price of a zero-coupon bond and the par value, indicates the investor's return.
- A zero-coupon bond is a debt security instrument that does not pay interest.
- You can sometimes get a great value on a zero-coupon bond and it can be a great investment if you have the cash for it.
- The zero-coupon bond was included in our investment portfolio as we wanted to diversify our investment strategy by including many variations.
- It is possible for a corporation to issue a zero-coupon bond, whose current yield is zero and whose yield to maturity is solely a function of the built-in price appreciation.
Meaning of Zero-coupon bond & Zero-coupon bond Definition