Zero coupon bond definition

A zero-coupon bond is less formally known as a zero. zero-coupon bond A bond that provides no periodic interest payments to its owner.

Income is accrued on zero-coupon bonds even though they do not pay any interest before maturity.Also called accrual bond, capital appreciation bond, zero.

Instead, investors buy zero coupon bonds at a deep discount from their face value.This may result in a cash flow problem since money (specifically, taxes) will be going out and no money (for example, interest income) will be coming in.If the bond is taxable (that is, it is a U.S. Treasury bond or a corporate bond), you will have to pay annual federal income tax on the accrued income even though you did not receive any cash flow from the bond before maturity.Note that this definition assumes a positive time value of money.A zero-coupon bond (also discount bond or deep discount bond) is a bond bought at a price lower than its face value, with the face value repaid at the time o.

Zero-Coupon Bond Definition |

Noun (plural zero-coupon notes) (finance) A promissory note that pays at maturity the value of the note with no separate interest payments, the effective interest.Zero-coupon bonds are quite useful in financial planning because they permit you to plan with certainty for specific rates of growth on the monies invested in them, provided that those monies will be left intact until maturity.What are the advantages and disadvantages of buying zero-coupon bonds.

Another drawback is that zero coupon bonds are volatile in the secondary market, so if you have to sell before maturity, you might have a loss.Definition of zero coupon bond in the dictionary.

Of course, if interest rates subsequently increase, the owner of a zero-coupon bond will be worse off because interest payments could have been reinvested at a rate higher than 7%.Zero-coupon bonds are subject to very large price fluctuations.

US Treasury Bonds - Fidelity

The bonds mature at full face value so the difference between the original issue price and the.Zero coupon bonds are corporate or municipal debt securities that trade at a deep discount from the face value, as the bond pays no interest to the bondholders during.Yield to Maturity 11 Now coupon bonds and the coupon effect.ZERO COUPON BONDS - Free definition results from over 1700 online dictionaries.Zero-coupon bond A bond in which no periodic coupon is paid over the life of the contract. | Definitions of zero-coupon

Definition of Zero Coupon Bonds |

Buy a zero-coupon bond with a 25-year maturity and watch the price plummet if market interest rates increase.

Zero Coupon Bonds - How is Zero Coupon Bonds abbreviated?

The exception occurs if you buy tax-exempt municipal zeros, on which no tax is due either during the term or at maturity.If interest from the bond is exempt from taxes (such as with an obligation of a state or municipality), or if a taxable issue is held in a tax-sheltered retirement account, taxability will not be an important issue.A zero-coupon bond convertible into the common stock of the issuing company after the stock reaches a certain price, using a put option inherent in the security.Instead, both the principal and the interest are paid at the maturity date.A aught coupon bond is a type of Obligation security that does not stipend common curiosity payments.Zero-coupon bonds also often suffer from a lack of liquidity and so may be difficult to sell at a fair price before maturity.