Zero Coupon Bond

A zero-coupon bond is an investment that does not yield interest over its term. In this scenario, the investor purchases the bond at a price lower than its face value, representing the amount it will be worth at maturity. The interest earned by the investor is derived from the difference between the face value and the purchase price. Essentially, the investor acquires the bond at a discounted rate, paying less than the face value, and receives the full face value when the bond matures. This approach allows the investor to save money on the initial purchase while earning interest through the bond's appreciation at maturity.