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

Internal Rate of Return (IRR)

A means of calculating the potential future return on an investment.

Retail Prices Index (RPI)

An index published each month by the Office for National Statistics, which measures the level of retail prices in the UK. Cash flows on all index-linked gilts are linked to the RPI.

Spot Rate

The currency exchange rate a bank quotes, valid with immediate effect.

Profit and Loss Statement (P&L)

A statement that summarises firm's expenses, costs, and revenues incurred during a time period. AKA income statement.

Limit order

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

Bond

Learn what a bond is

After-hours trading

Trading outside of a stock exchange's opening hours.

Coupon

Also called a dividend, this is the fixed annual interest paid to gilt holders. It’s usually paid in two equal, semi-annual instalments and expressed as a percentage of the nominal value of the gilt.

Value Investing

The art of buying shares which trade below their value, according to the analysis of the value investor.

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