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
Sustainable Urban Drainage and Biodiversity
Awards for champions of these interconnected fields now open.
Microcosm of biodiversity in balconies and containers
How minor design adaptations for considerable biodiversity benefit.
CIOB student competitive construction challenge Ireland
Inspiring a new wave of Irish construction professionals.
Challenges of the net zero transition in Scotland
Skills shortage and ageing workforce hampering Scottish transition to net zero.
Private rental sector, living standards and fuel poverty
Report from the NRH in partnership with Impact on Urban Health.
.Cold chain condensing units market update
Tracking the evolution of commercial refrigeration unit markets.
Attending a conservation training course, personal account
The benefits of further learning for professsionals.
Restoring Alexander Pope's grotto
The only surviving part of his villa in Twickenham.
International Women's Day 8 March, 2025
Accelerating Action for For ALL Women and Girls: Rights. Equality. Empowerment.
Lack of construction careers advice threatens housing targets
CIOB warning on Government plans to accelerate housebuilding and development.
Shelter from the storm in Ukraine
Ukraine’s architects paving the path to recovery.
BSRIA market intelligence division key appointment
Lisa Wiltshire to lead rapidly growing Market Intelligence division.
A blueprint for construction’s sustainability efforts
Practical steps to achieve the United Nations Sustainable Development Goals.
Timber in Construction Roadmap
Ambitious plans from the Government to increase the use of timber in construction.
ECA digital series unveils road to net-zero.
Retrofit and Decarbonisation framework N9 launched
Aligned with LHCPG social value strategy and the Gold Standard.
Competence framework for sustainability
In the built environment launched by CIC and the Edge.
Institute of Roofing members welcomed into CIOB
IoR members transition to CIOB membership based on individual expertise and qualifications.
Join the Building Safety Linkedin group to stay up-to-date and join the debate.
Government responds to the final Grenfell Inquiry report
A with a brief summary with reactions to their response.
Comments