Discussing Zero Coupon Bond Valuation

Zero coupon bonds are issued at a deep discount and repaid the face value at maturity. The greater the length of the maturity is the cheaper price a bond has. Unlike other bonds, the investor’s return is the difference between the purchase price and the face value. An investor preferring a long-term investment may purchase zero coupon bonds such as saving money for children’s college tuition. The deep discount helps the investor grow a small amount of money into a sizable sum over several years. Normally investors buy zero coupon bonds when interest rates are high. This presentation gives an overview of zero coupon bond product and valuation.