Accounting Dictionary

Zero Coupon Bonds

Zero coupon bonds increase in value every month, but pay no regular interest payments.

If you buy a series EE government savings bond, the government will not pay you regular monthly payments, but when you cash it in you will get more than you originally paid for the bond. The interest has been accruing on this bond and you will get both the interest and the principal when it matures. This is an example of a zero coupon bond.

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