What is the "zero coupon bond"? How it is issued, valued in the market, and which investor should consider a zero coupon bond?© BrainMass Inc. brainmass.com June 3, 2020, 10:51 pm ad1c9bdddf
Zero coupon bond is a bond that pays no annual interest but is sold at a discount below par, thus providing compensation to investors in the form of capital appreciation. In other words, these bonds pay no coupons at all, but are offered at a discount below their par values and hence provide capital appreciation rather than interest income.
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This solution defines zero coupon bonds and discusses how it is issued, valued in the market and what investor should consider a zero coupon bond.