Practical Law Glossary Item 4-382-3917 (Approx. 2 pages)
Glossary
Zero Coupon Bonds
A type of bond that does not pay any interest during its life. A zero coupon bond is issued at a deep discount to its face value, or par value, which is the amount that will be paid on the bond at maturity. An investor receives a lump sum interest payment at maturity equal to the difference between the face value and the initial discounted purchase price. The difference between the face value and the initial discounted purchase price is known as the original issue discount.