Zero Coupon Bond (Noun)
Meaning
A bond that is issued at a deep discount from its value at maturity and pays no interest during the life of the bond; the commonest form of zero-coupon security.
Classification
Nouns denoting possession and transfer of possession.
Examples
- The investor purchased a zero-coupon bond with a face value of $1,000 that matured in 10 years, paying no interest until then.
- The company issued a zero-coupon bond to raise capital, offering a discounted price to attract investors.
- Zero-coupon bonds are often used by investors seeking to avoid reinvestment risk, as they do not have to worry about reinvesting interest payments.
- The zero-coupon bond market has grown in recent years, as investors seek higher returns in a low-interest-rate environment.
- The investor's portfolio included a mix of stocks and zero-coupon bonds, providing a balance of growth and fixed income.