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What is Zero coupon bonds?

Open uri20170510 32134 7ezpi6?1494421819 asked

Hi I am preparing for CA exam. Can I know, What is Zero coupon bonds?

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4 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 answered

Hi, a bond that is issued at a deep discount to its face value but pays no interest.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 answered

Hi, Zero coupon bonds are sold at a substantial discount from the face amount. For example, a bond with a face amount of $20,000, maturing in 20 years with a 5.5% coupon, may be purchased for roughly $6,757. At the end of the 20 years, the investor will receive $20,000. The difference between $20,000 and $6,757 represents the interest that compounds automatically until the bond matures

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 answered

Zero coupon bonds are sold at a substantial discount from the face amount. For example, a bond with a face amount of $20,000, maturing in 20 years with a 5.5% coupon, may be purchased for roughly $6,757. At the end of the 20 years, the investor will receive $20,000. The difference between $20,000 and $6,757 represents the interest that compounds automatically until the bond matures

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 answered

Dear, your query is that What is Zero coupon bonds? answer of your query is that A debt security that doesn't pay interest (a coupon) but is traded at a deep discount, rendering profit at maturity when the bond is redeemed for its full face value. Also known as an "accrual bond." In other words Zero coupon bonds are sold at a substantial discount from the face amount. For example, a bond with a face amount of $20,000, maturing in 20 years with a 5.5% coupon, may be purchased for roughly $6,757. At the end of the 20 years, the investor will receive $20,000. The difference between $20,000 and $6,757 represents the interest that compounds automatically until the bond matures Thanks & Regards,

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