What are 'zero-coupon bonds'? Definition & meaning

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

Income statement

A summary of a company's income and expenses over a set period of time.

Net Income (NI)

The money a firm is left with from sales after subtracting taxes and different business costs.

Depository

We look at what is a depository and what role they play in keeping markets work.

Gross Margin

The difference between a company's revenue and the cost to produce its goods/services, divided by revenue.

Xetra

A trading venue operated by the Frankfurt Stock Exchange.

Ponzi Scheme

A form of fraud designed to lure new investors, and pays the earlier backers by using the new investors' money.

United States Dollar (USD)

The famous greenback our friends in the US use as currency.

Net asset value

Mutual funds and investment trusts are priced on their net asset value (NAV).

Limit order

Learn what a limit order is and how to use it to make the most of your portfolio.

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Zero coupon bond