Zero-coupon bond

Zero coupon bonds are bonds that does not have a coupon rate meaning it does not pay any regular and recurring interests. The price that an investor pays for the coupon bond would be deeply discounted from its face value. If a zero-coupon bond's face value is $10,000 it can be acquired by an investor at around $9,000 depending on market demand. When the bond matures, the investor receives payment at the bond's face value at $10,000. In essence, the investor received an interest of 11% at maturity.

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