UK Accounting Glossary
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.”
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.