Investor Glossary-zero-coupon bondInvestor Glossary-zero-coupon bondInvestor Glossary-zero-coupon bondInvestor Glossary-zero-coupon bondInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Zero-coupon Bond

The HTML to link to this page
 

A zero-coupon bond is a bond that does not pay interest but instead is sold at a discount, i.e., for less than its face value. For example, a zero-coupon bond with a face value of $5,000 may sell for only $4,200. When the zero-coupon bond matures years later, the bond buyer receives the full $5,000; the $800 difference is the "interest" earned on the zero-coupon bond. A well-known example of a zero-coupon bond is the series EE savings bond sold by the U.S. Treasury. This bond sells for half its face value, which ranges as high as $10,000. One advantage to issuing a zero-coupon bond is that the issuer does not need to make periodic interest payments to its bondholders. One possible disadvantage to bond investors is that zero-coupon bond prices are more volatile on the secondary bond market, since the lack of periodic interest payments is viewed as risky. A zero-coupon bond is also known as an accrual bond.



Rate this zero-coupon bond definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: Key Rate Duration, EBITDA, phantom income, debt service coverage, inflation, liquidity ratio, wholly-owned subsidiary, limit order, Zero Cost Collar, FTSE, LIBOR, required rate of return, covered put, 401a, class C shares, diluted share, annual return, APR, stock market close, VIX, current ratio, labor relations, 144a, ex-dividend date, 1035 exchange, cancelled check, per diem, implied volatility, real GDP, minority interest, margin rate, command economy, ex-dividend, quality assurance, irrevocable trust, risk management, in escrow, reverse mortgage, retained earnings, deferred tax, dividends payable, average price per share, option premium, balance sheet, open position, 1031 exchange, stock split, FICO score, deferred revenue


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Investor Glossary | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2015 Investor Glossary - All rights reserved - Terms of Use