Zero Coupon Bond Pricing: A Comprehensive Guide
A zero coupon bond is a type of fixed income security that pays no coupons (interest) during its life. Instead, it is issued at a deep discount to its face value and redeems at face value at maturity. For example, a $1,000 zero-coupon bond maturing in 10 years might be issued at $500, and the investor would receive $1,000 at maturity.