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Zero coupon bonds

Zero coupon bonds

What is a zero coupon bond?

A zero coupon bond is a bond that does not make interest payments.

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This type of bond is issued at a discount to its maturity value and is redeemed at the maturity value, generating a return for the investor.

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UK Treasury bills are an example of a zero coupon bond.

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Zero coupon bonds can be issued by governments, municipalities, and companies.

More terms

Maturity date

The date on which a gilt is redeemed and the gilt holder receives the repayment of the nominal amount and final dividend or coupon payment.

Capital

Learn what financial capital means

Yield

Income from an investment as a percentage of its current price.

Wall Street

A street in New York that became a figure of speech for the financial markets of the US.

Packaged Retail and Insurance-based Investment Product (PRIIP)

An investment where, regardless of its legal form, the amount repayable to the retail investor is subject to fluctuations.

Hedge Fund

Investment funds that are often associated with riskier and shorter-term trading strategies.

Costs and Charges

The money you pay when investing.

Alpha

The percentage by which an investor outperforms a relevant benchmark.

Geometric Mean Return

A way of calculating compound returns on an investment or savings over a set period of time.

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