**Zero**-**Coupon** Bond (Also known as Pure Discount Bond or Accrual Bond) refers to those **bonds** which are issued at a discount to its par value and makes no periodic interest payment...

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**Zero**-**coupon** **bonds** are very common, and most trade on the major exchanges. Corporations, state and local governments, and even the U.S. Treasury issue **zero**-**coupon** **bonds**.

**Zero**-**coupon** **bonds**, sometimes known as strips, have only one cash flow, the redemption payment on maturity. Hence the name: strips pay no **coupon** during their life. In virtually all cases **zero**-**coupon**...

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**Zero** **coupon** **bonds** are **bonds** that do not pay interest during the life of the **bonds**. Instead, investors buy **zero** **coupon** **bonds** at a deep discount from their face value.[1]Characteristics of **zero** **coupon** b...

**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...

A **zero**-**coupon** bond (also called a **zero**) is a bond which pays no **coupon** payments. Its yield results from the difference between its issue price and maturity value and its current value equals the present...

**Zero**-**Coupon** **Bonds**: Definition and Basics for Investors. A **zero**-**coupon** bond is a bond that is bought at a discount (a price lower than its face value), with the face value repaid to the investor at the...

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A **zero**-**coupon** bond, however, does not make interest payments. Instead, the bond holder is rewarded with an increase in the value of the bond over time.

- Add 1 to the required interest rate on the bond.
- Determine the number of time periods (years in this case) remaining until the bond matures.
- Take the sum calculated in Step 1 above and raise it to the power of the remaining time period.
- Divide the par (face) value of the bond by the result of the previous step.

**Zero**-**coupon** **bonds** can also be created by investment banks and brokerage firms, who take a regular bond and separate the principal from the interest payments to create two separate securities.

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A 5 year **zero** **coupon** bond is issued with a face value of $100 and a rate of 6%. Looking at the formula, $100 would be F, 6% would be r, and t would be 5 years.

- Example of Zero Coupon Bond Formula with Rate Changes