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

Net Income (NI)

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

Forward pricing

Mutual funds are traded on a forward pricing basis, meaning the price you see will be different to the price you may trade at.

Leverage

A method of trading using borrowed money that usually involves a very high level of risk.

Volatility

A measure of how much the prices of an asset or index vary over time.

Accounting standards

The rules a company follows when preparing financial statements.

52-week high/low

The highest, or lowest, price a share has traded at in a passing year.

Income statement

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

Inflation

The increase in the prices of goods and services over time, and the process by which money loses its value.

Account balance

The amount of money a user has stored in a financial repository.

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Zero coupon bond