Zero Coupon Bond

Zero Coupon Bond means:
a security that makes no periodic interest payments but instead is sold at a deep discount from its face value. Long-term bond on which interest is not payable on a regular basis, but rather upon maturity of the bond. The buyer of such a bond receives the rate of return by the gradual appreciation of the security, which is redeemable at face value on a specified maturity date. It is sold at a deep discount from its face value. Accrued interest is taxable annually

See also other Tax Terms and Definitions in U.S.A.

original issue discount.

Description and Definition of Zero Coupon Bond

Zero-coupon bonds are bonds priced at a large discount from face value. The difference between the purchase price and the face value is your interest. If you buy a zero-coupon bond, every year as it gets closer to maturity the bond increases in value. You pay tax annually on this increase in value, which you recognize as interest income.

Resources

See Also

Further Reading

• Zero Coupon Bond in the West's Tax Law Dictionary
• Zero Coupon Bond in “A Dictionary of Taxation”