Zero coupon bonds fall under the fixed-income securities segment. These don’t pay any interest or coupon, and at the time of maturity, the investor receives the face value or par value. Zero coupon bonds are also referred to as ‘Zeroes’ by many traders for this reason. These bonds generally have 10-15 years to maturity. Hence, they are traded at a deep discount. The bond prices vary as per the time to maturity.
So, why will any investor invest in a zero-coupon bond? The primary reason for investing in these is that they are issued and trade at a discount from the face value.
Here, we will explain zero-coupon bonds in detail and some of the factors that investors must consider while investing in these instruments.(more…)