Question

Explain the concept of a zero-coupon bond in details 150-250 words.

Answer 1

Solution :-

1. A Zero Coupon Bond is a bond which is also known as Discount Bond.  

2. A Zero-coupon bond is a debt security that does not pay interest but instead trades at a deep discount.

3. A Zero Coupon Bond is a Bond in which no regular Payment of Coupon are made by company.

4. In case of Zero Coupon Bond , there is a fixed maturity period.

5. In case of Zero Coupon Bond , a face value of the Bond is to be repaid to the investor or lender

6. A Zero Coupon Bond is issued at discount .

7. The Benefit of the Zero Coupon Bond Holder is the difference between the Issue Price and the face Value

8. Zero coupon bonds may be long or short term investments.

9. The Duration of a Zero Coupon Bond is equal to Time to maturity .

10. The investor also receives the principal or face value of the investment when the bond matures.

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