Zero-coupon bonds are issued at a deep discount, and they repay the par value at maturity. The difference between the purchase price and the par value represents the investor's return.

For example, you might pay $5,000 for a zero-coupon bond with a face value of $10,000 and receive the full price, $10,000, upon maturity in 20 or 30 years. Zero-coupon CDs work the same way.

For example, if you buy a zero-coupon bond with a face value of $10,000 and a 10-year maturity at a discount price of $6,500, you’ll get back your $6,500 principal plus $3,500 in profit when the ...

Zero-coupon bonds are very sensitive to changes in interest rates. When interest rates rise, the market value of existing zero-coupon bonds usually drops more than that of traditional coupon bonds.

Carrying over from the example above, the value of a zero-coupon bond with a face value of $1,000, YTM of 3%, and two years to maturity would be $1,000 / (1.03) 2, or $942.59. Explain Like I'm Five ...

Zero-coupon bonds are debt securities that are sold at a deep discount for a price far below their face value. This is because they don't make regular interest payments.

Determining the current value of a zero-coupon bond is actually simpler than traditional bonds because there aren’t any coupon payments to factor in. Instead, investors only need to find the present ...

Looking for investments offering predictable long-term returns, zero-coupon bonds might be a good choice. But what is a zero coupon bond, and how do they work? Skip to main content. Boydton ...

The difference between the purchase price and par value is the return earned on the STRIPS. Bottom line. Zero-coupon bonds trade at a discount and don't pay interest during the term of the bond.

Zero coupon bonds are taxed differently because they don't pay regular interest. Instead, they're sold at a discount and reach full value at maturity. Each year, investors must report "imputed ...

For example, you might pay $5,000 for a zero-coupon bond with a face value of $10,000 and receive the full price, $10,000, upon maturity in 20 or 30 years. Zero-coupon CDs work the same way.