Zero coupon bond

A zero coupon bond is a discount instrument that gives yield in the form of interest. A zero coupon bond is issued at a discount and have no interest coupons.

A zero coupon bond pays a nominal amount at maturity and are amortized only once, at maturity. Zero coupon bonds are issued of the National Debt Office, mortgage institutions, banks and companies. Zero coupon bonds are traded on a secondary market, the bond market. Zero coupon bonds have standardized terms. A zero coupon bond will increase in value over time, to reach the nominal amount at maturity.