Zero-Coupon Bond

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Dictionary Says

Definition of 'Zero-Coupon Bond'

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".
Investopedia Says

Investopedia explains 'Zero-Coupon Bond'

Some zero-coupon bonds are issued as such, while others are bonds that have been stripped of their coupons by a financial institution and then repackaged as zero-coupon bonds. Because they offer the entire payment at maturity, zero-coupon bonds tend to fluctuate in price much more than coupon bonds.

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    A debt obligation with coupons attached that represent semiannual interest payments. Also known as a "bearer bond".
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  • Discount

    The condition of the price of a bond that is lower than par. The discount equals the difference between the price paid for a security and the security's par value.
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    • Original Issue Discount - OID

      The discount from par value at the time that a bond or other debt instrument is issued. It is the difference between the stated redemption price at maturity and the issue price.
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    • Zero-Coupon Convertible

      A fixed income instrument that is a combination of a zero-coupon bond and a convertible bond. Due to the zero-coupon feature, the bond pays no interest and is issued at a discount to par ...
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    • Face Value

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    • Compound Accreted Value - CAV

      A measure of the theoretical value of a zero-coupon bond at any given point in time. Because there are no interest payments like there are with traditional bonds, the interest of a ...
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      The interest portion of mortgage, Treasury or bond payments, which is separated and sold individually from the principal portion of those same payments. The periodic payments of several ...
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