Coupon bond. An unregistered negotiable bond on which interest and principal are payable to the holder regardless of whom it was. Note that this definition assumes a positive time value of moneyit does not make periodic interest payments or have so called coupons hence the term zero coupon bond. A coupon is the annual interest rate paid on a bond expressed as a percentage of the face value also referred to as the coupon rate. Definition of coupon bond.
Nabard zero coupon bonds are available for subscription right now the offer will close on 18th july and i think this is the first time im ever writing about any zero coupon bonds on offer for sale. A coupon bond also referred to as a bearer bond is a debt obligation with coupons attached that represent semi annual interest payments. How to calculate a zero coupon bond. A zero coupon bond sometimes referred to as a pure discount bond or simply discount bond is a bond that does not pay coupon payments and instead pays one lump sum at maturity.
Most bonds make periodic interest payments to their owners as a return on investment and a reward for taking the risk inherent in the bond. A zero coupon bond also discount bond or deep discount bond is a bond where the face value is repaid at the time of maturity. When the bond reaches maturity its investor receives its par or face value. These payments are known as coupons because many years ago.
A zero coupon bond has the important advantage of being free of reinvestment risk though the downside is that there is no opportunity to enjoy the effects of a rise in market interest rates. The zero coupon bond effective yield formula is used to calculate the periodic return for a zero coupon bond or sometimes referred to as a discount bond. With coupon bonds there are no records of the purchaser.