What is 'Zero coupon bonds'? | Freetrade Dictionary

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 value

What's the maturity value of a bond?

Nominal amount

The face value of a gilt. It represents the amount that will be repaid to the holder at maturity and is also used to calculate the dividend or coupon payment.

LSE

London Stock Exchange, which was founded in 1571 and now has a market cap of almost $5 trillion.

Running yield

The annual interest payment (dividend) divided by the current market price of a bond.

Professional Client

An investor that is able to meet several regulatory criteria.

Zero coupon bonds

What is a zero coupon bond?

Over-The-Counter (OTC)

A security that is sold outside of an exchange.

Withholding Tax

A tax deduction made at the source of the payment.

Value Investing

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

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