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What is a Zero Coupon Bond?

A Zero Coupon Bond is one that does not make interest payments - the bondholder only receives the face value back at time of maturity.

The bond purchaser typically pays a deep discount for the bond, and the gain made over the life of the investment is the difference between the amount paid for the bond and the face value returned to the investor when the bond matures.

What is a Bond Coupon?
Is There Anything Else I Need to Know About Bonds?

Keywords: interest rates, bonds, zero-coupon bond,