Zero-coupon bond
A zero-coupon bond, also known as a deep discount bond, is a form of debt security that does not pay interest to the bondholder. This is different from a normal bond which does pay interest (coupons). Instead a zero-coupon bond is traded at face value when the bond matures.
The profit gained by investors is derived from difference between what they pay for the bond and the amount they sell it for at maturity. This difference is achieved in part because of the large (or deep) discount that a zero-coupon bond is purchased at.
An example is a zero-coupon bond issued at £50 and sold for £100 after seven years. This would have offered a return equivalent to over 10% per year compound over the seven years of the bond. In the UK as in many other countries, some of the capital gain on a zero-coupon bond is treated as taxable income.
A zero-coupon bond can be useful in property financing as income is often in short supply in the early years of a project. However, it is considered a riskier investment than regular bonds because if the bond issuer defaults, the investor will lose all their investment and won’t have even received interest payments.
[edit] Related articles on Designing Buildings Wiki
Featured articles and news
Gregor Harvie argues that AI is state-sanctioned theft of IP.
Many resources for visitors aswell as new features for members.
Using technology to empower communities
The Community data platform; capturing the DNA of a place and fostering participation, for better design.
Heat pump and wind turbine sound calculations for PDRs
MCS publish updated sound calculation standards for permitted development installations.
Homes England creates largest housing-led site in the North
Successful, 34 hectare land acquisition with the residential allocation now completed.
Scottish apprenticeship training proposals
General support although better accountability and transparency is sought.
The history of building regulations
A story of belated action in response to crisis.
Moisture, fire safety and emerging trends in living walls
How wet is your wall?
Current policy explained and newly published consultation by the UK and Welsh Governments.
British architecture 1919–39. Book review.
Conservation of listed prefabs in Moseley.
Energy industry calls for urgent reform.
Heritage staff wellbeing at work survey.
A five minute introduction.
50th Golden anniversary ECA Edmundson apprentice award
Showcasing the very best electrotechnical and engineering services for half a century.
Welsh government consults on HRBs and reg changes
Seeking feedback on a new regulatory regime and a broad range of issues.
CIOB Client Guide (2nd edition) March 2025
Free download covering statutory dutyholder roles under the Building Safety Act and much more.
Comments