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Zero Coupon Bond

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Description

A debt security that doesn’t pay interest but is issued at a discount to its face value, with the full face value paid at maturity.

A zero coupon bond is a debt instrument issued at a significant discount to its par (face) value and does not pay periodic interest. Instead, the investor receives the full face value upon the bond’s maturity, with the difference between the purchase price and the face value representing the bond’s yield. These bonds are attractive for their simplicity and predictable returns.

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