Zero-Coupon Bond

Zero-coupon bond is a zero-coupon bond does not make periodic coupon payments. It is generally issued or purchased at a discount and pays its face value at maturity, subject to issuer credit risk.

A simple example

An investor may pay less than $1,000 for a zero-coupon bond that is scheduled to pay $1,000 at maturity.

Why this matters to income investors

The investor receives no periodic cash interest, price sensitivity can be substantial, and taxable interest may be recognized before cash is received.

How to use zero-coupon bond in your research

Review maturity, yield, issuer credit, tax treatment, liquidity, and whether the lack of current cash income matches the portfolio’s purpose.

This material is general education and information, not individualized investment, tax, or legal advice.