Definitions:

1. A bond that is issued at a deep discount from its value at maturity and pays no interest during the life of the bond. NOUN
   • The price of a zero-coupon bond is highly sensitive to changes in interest rates, especially as it approaches maturity.
2. A debt security that unlike regular bonds, does not make interest payments during its life, is sold at a deep discount to its face value, and pays the full face value at maturity. NOUN
   • Some zero-coupon bonds are backed by government agencies or corporations, providing investors with added security.

Synonyms:

• accrual bond
• bullet bond
• discount bond
• zero coupon bond