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
Practice costs for architectural technologists
Salary standards and working out what you’re worth.
The Health and Safety Executive at 50
And over 200 years of Operational Safety and Health.
Thermal imaging surveys a brief intro
Thermal Imaging of Buildings; a pocket guide BG 72/2017.
Internally insulating a historical building
An experimental DIY approach using mineral thermal lime plaster.
Tree species selection for green infrastructure: A guide for specifiers.
50 million new trees over 25 years.
Art of Building CIOB photographic competition public vote
The last week to vote for a winner until 10 January 2025.
The future of the Grenfell Tower site
Principles, promises, recommendations and a decision expected in February 2025.
20 years of the Chartered Environmentalist
If not now, when?
Journeys in Industrious England
Thomas Baskerville’s expeditions in the 1600s.
Top 25 Building Safety Wiki articles of 2024
Take a look what most people have been reading about.
Life and death at Highgate Cemetery
Balancing burials and tourism.
The 25 most read articles on DB for 2024
Design portion to procurement route and all between.
The act of preservation may sometimes be futile.
Twas the site before Christmas...
A rhyme for the industry and a thankyou to our supporters.
Plumbing and heating systems in schools
New apprentice pay rates coming into effect in the new year
Addressing the impact of recent national minimum wage changes.
Comments