Define: Zero Coupon Bonds

UK Accounting Glossary

Definition: Zero Coupon Bonds

Quick Summary

A bond without a stated interest rate.

What is the dictionary definition of Zero Coupon Bonds?

Dictionary Definition

Full Definition

A bond without a stated interest rate. Because no interest is paid, the bond will sell for a discount from it’s maturity value. Rather than receiving interest, an investor’s compensation will be the difference between the discounted price at which the bond was purchased and the price the investor receives when selling the bond. If the investor holds the bond to maturity, the investor will earn the difference between it’s discounted cost and it’s maturity value. A U.S. Series EE savings bond is a form of a zero-coupon bond.

Zero Coupon Bonds FAQ's