1 / 8

Understanding Zero Coupon Bonds

Understanding Zero Coupon Bonds. Zero coupon bonds is a bond that is issued at a discounted price and redeemed at par at the time of maturity. . Lets try and understand this through an illustration. Let us assume that Mr Rahul

leann
Download Presentation

Understanding Zero Coupon Bonds

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Understanding Zero Coupon Bonds

  2. Zero coupon bonds is a bond that is issued at a discounted price and redeemed at par at the time of maturity.

  3. Lets try and understand this through an illustration

  4. Let us assume that Mr Rahul has invested Rs. 920/- in a zero coupon. Let us further assume that after 1 year he would receive Rs. 1000/- .

  5. In the instant case Rahul pays Rs. 920/- (Discounted price) and he would receive Rs. 1000/- (Par value) after 1 year.

  6. Return (yield) on the bond for Rahul is 8.70% and can be arrived as follows (1000 – 920) / 920

  7. Thus Zero Coupon Bond is nothing but a terminology used for a bond that is issued at a discounted price and redeemed at par on maturity

  8. Hope you have understood the Concept of Zero Coupon Bond Please give us your feedback at professor@tataamc.com

More Related