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Zero-coupon bond

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A zero-coupon bond is a discount bond that makes no coupon payments.

For example, a zero-coupon bond might have a face value of $1,000, have a term of one year, carry no interest payments but will be issued at a discount price of $950.

In this case, a purchaser will earn money on the bond simply by holding it and receiving the face value at the end of the period rather than collecting interest payments over the life of the bond.

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