Zero coupon bonds, which are referred to as ‘Zeroes’ by traders, are bonds that do not pay any coupons, and hence the name. You may wonder that if there are no coupons, why would any investor be interested. The answer is that they are issued at a discount from the face value, and always trade below the face value. In other words, zero coupon bonds always trade at a discount prior to maturity and can never trade at a premium.
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