Define: Zero Coupon Bond

UK Accounting Glossary

Definition: Zero Coupon Bond

Quick Summary

A Zero Coupon bond is a bond that pays no interest. Its coupon equals zero %. Because it pays no interest, it is sold at a very big discount to it’s maturity value and it’s value accretes until it is worth par or face value at maturity. It’s accretion rate is determined by “the market.”

What is the dictionary definition of Zero Coupon Bond?

Dictionary Definition

A Zero coupon bond is a bond issued at a discount to mature at it’s face value; the discount is set so that no interest is paid within the life of the bond.

It’s considered the ultimate form of a deep discount bond.

Full Definition