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A zero-coupon bond (also discount bond or deep discount bond) is a bond in which the face value is repaid at the time of maturity. [1] Unlike regular bonds, it does not make periodic interest payments or have so-called coupons , hence the term zero-coupon bond.
This liability can make zero-coupon bonds less tax-efficient for some investors. Commitment: Zero-coupon bonds are intended to be a long-term commitment, usually spanning 10 to 30 years. For ...
For example, if a zero-coupon bond with a $20,000 face value and a 20-year term pays 5.5% interest, the interest rate is knocked off the purchase price and the bond might sell for $7,000.
An example of zero coupon bonds is Series E savings bonds issued by the U.S. government. ... Hence, a deep discount US bond, selling at a price of 75.26, indicates a ...
Zero-coupon bonds do not pay interest. They are issued at a deep discount to account for the implied interest. They are issued at a deep discount to account for the implied interest. Because most bonds have predictable income, they are typically purchased as part of a more conservative investment scheme.
Premium bonds will offer a yield to maturity that’s less than the stated coupon, while discount bonds will offer a yield that’s higher than the coupon. How bonds are rated.
In finance, a coupon is the interest payment received by a bondholder from the date of issuance until the date of maturity of a bond. [1] Coupons are normally described in terms of the "coupon rate", which is calculated by adding the sum of coupons paid per year and dividing it by the bond's face value. [2] For example, if a bond has a face ...
Original Issue Discount (OID) is a type of interest that is not payable as it accrues. OID is normally created when a debt , usually a bond , is issued at a discount . In effect, selling a bond at a discount converts stated principal into a return on investment, or interest.
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