Zero Coupon Security (Noun)
Meaning
A security that makes no interest payments but instead is sold at a deep discount from its face value.
Classification
Nouns denoting possession and transfer of possession.
Examples
- The investor purchased a zero-coupon security with a face value of $1,000 for just $600, essentially earning interest through the discount.
- Zero-coupon securities have become increasingly popular among investors looking for a low-risk investment option with a guaranteed return.
- The company issued a zero-coupon security to raise capital without having to worry about making regular interest payments to investors.
- The investor held onto the zero-coupon security until maturity, at which point they received the full face value of $1,000.
- Zero-coupon securities are often used as an attractive alternative to traditional bonds for investors seeking to defer taxes on interest income.