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    Zero Coupon Bonds

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    Naveen Kumar
    Zero coupon bonds are bonds that are issued at a discounted price and redeemed at their full par value at maturity. For example, if Mr. Rahul invested Rs. 920 in a zero coupon bond that will pay Rs. 1000 at maturity in 1 year, his return would be 8.70% calculated as (1000 - 920) / 920. Zero coupon bonds provide a fixed return based on the difference between the discounted purchase price and full par value received at maturity.

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    Zero Coupon Bonds

    Uploaded by

    Naveen Kumar
    20 views8 pages
    Zero coupon bonds are bonds that are issued at a discounted price and redeemed at their full par value at maturity. For example, if Mr. Rahul invested Rs. 920 in a zero coupon bond that will pay Rs. 1000 at maturity in 1 year, his return would be 8.70% calculated as (1000 - 920) / 920. Zero coupon bonds provide a fixed return based on the difference between the discounted purchase price and full par value received at maturity.

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    Zero coupon bonds are bonds that are issued at a discounted price and redeemed at their full par value at maturity. For example, if Mr. Rahul invested Rs. 920 in a zero coupon bond that will pay Rs. 1000 at maturity in 1 year, his return would be 8.70% calculated as (1000 - 920) / 920. Zero coupon bonds provide a fixed return based on the difference between the discounted purchase price and full par value received at maturity.

    Copyright:

    © All Rights Reserved
    Download as PPS, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    20 views8 pages

    Zero Coupon Bonds

    Uploaded by

    Naveen Kumar
    Zero coupon bonds are bonds that are issued at a discounted price and redeemed at their full par value at maturity. For example, if Mr. Rahul invested Rs. 920 in a zero coupon bond that will pay Rs. 1000 at maturity in 1 year, his return would be 8.70% calculated as (1000 - 920) / 920. Zero coupon bonds provide a fixed return based on the difference between the discounted purchase price and full par value received at maturity.

    Copyright:

    © All Rights Reserved
    Download as PPS, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 8

    Understanding

    Zero Coupon Bonds


    Zero coupon bonds is a bond
    that is issued at a discounted
    price and redeemed at par
    at the time of maturity.
    Lets try and understand
    this through an illustration
    Let us assume that Mr Rahul
    has invested Rs. 920/- in a zero
    coupon. Let us further assume
    that after 1 year he would
    receive Rs. 1000/- .
    In the instant case Rahul
    pays Rs. 920/- (Discounted
    price) and he would receive
    Rs. 1000/- (Par value) after
    1 year.
    Return (yield) on the bond
    for Rahul is 8.70% and can
    be arrived as follows
    (1000 920) / 920
    Thus Zero Coupon Bond is
    nothing but a terminology
    used for a bond that is issued
    at a discounted price and
    redeemed at par on maturity
    Hope you have understood the
    Concept of Zero Coupon Bond

    Please give us your feedback at


    professor@tataamc.com

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