What is the zero coupon bond 1
1. A tax deferral effect, as the interest income is paid out in total at the end of the term and only then has to be taxed. This tax deferral effect can also lead to a tax relief effect if the investor acquires zero bonds whose maturity falls within a period in which he can expect a comparatively low income (e.g. after retirement). In this respect, attention must be paid to a staggered spread of the due dates at different times.
2. A compound interest effect, since the interest is accumulated at a fixed interest rate between the time of purchase and repayment. Because of this compound interest effect, the prices of the zero bonds react disproportionately to changes in the interest rate level.
The German word for zero bonds is zero coupon bond. These are bonds that do not have an interest coupon. So there are no regular interest payments, but the interest income results from the difference between the redemption price and the issue price. The bond holder therefore only receives a one-off payment.
Bearer bonds for which no interest is paid during the term, but the remuneration for the transfer of capital is granted as the difference between the higher repayment price and the issue price. If the paper is not sold prematurely, the redemption profit will only be taxed at the end of the term. The investor can choose between the issue return or the actually realized return as a tax base.
Abbreviation for zero coupon bonds (= zero coupon bonds); Bonds traded on the euro market that do not have an interest coupon, i.e. do not generate any current interest income. Instead, they are issued well below or at par / and redeemed at maturity at face value or higher. The interest income for the investor is the difference between the (lower) purchase price and the (higher) redemption price.
A zero bond or zero coupon bond is a bond without current interest that is issued discounted and redeemed with compound interest (obligation). So they are fixed-income securities that are issued at a discounted rate and redeemed at face value when they mature. In contrast to conventional bonds, the interest is not paid periodically, but is accumulated and therefore also earns interest again. This guarantees the reinvestment rate (compound interest effect). The difference between the issue price and the nominal value represents the compensation for the ongoing interest payments.
Economically there is no difference between
(a) pure zero bonds, for which the issue price is calculated by discounting the nominal value, and
(b) the compounding bonds or interest-bearing bonds, for which the redemption price is determined by discounting the issue price.
The advantage for the issuer of zero bonds is that longer terms can be enforced with this instrument and there are no interest payment obligations during the term.
Since zero bonds usually have a relatively long maturity and the interest is deferred, particularly high demands are made on the creditworthiness of the issuer. Due to the compound interest effect, zero coupon bonds are subject to disproportionate price fluctuations compared to the classic fixed-interest traditional bonds. This effect may be considerably increased in the case of long remaining terms.
Zero bonds are suitable for investors with a long-term perspective, since interest and reinvestment rates are fixed at the time of issue, which makes this instrument particularly interesting in periods of high interest rates. For investors who tend to plan for the short term, zero bonds are only considered for speculative reasons with an expected decline in interest rates because of their high price sensitivity.
In the case of a stripped bond, a zero bond is created from a normal bond by separating the jacket and the coupon and both of them are also traded separately. Often this is done through the involvement of a trustee, with whom the coat and bow are deposited as security for the zero bonds issued. Such forms of investment are known under the terms TIGRS (Treasury Investment Growth Receipts) and CATS (Certificates of Accrual on Treasury Securities).
Bonds that are issued below par, i.e. below par, and are repurchased at par at maturity. The difference (disagio) represents the accumulated interest. Such a security is also known as a zero coupon bond, since the coupon is missing from an issued security certificate. The opposite of the zero bond is the classic straight bond (industrial bond). If a classic bond of this type is to be turned into a zero bond, the stock shell can be separated from the interest coupon, which leads to a so-called stripped bond. Zero bonds usually have a very long term. Due to the fixed interest rate, changes in the market interest rate can result in significant price fluctuations in the bond, which makes it particularly interesting for speculative investors. From a tax point of view, the discount amount is not to be spread over the term, but to be taxed in full in the year of redemption or repurchase. With these aspects in mind, the zero bond can be an interesting form of investment if you want to shift income into later years.
Bond without coupon (zero coupon bond), d. In other words, there are no ongoing interest income. The interest income for the creditor results from the difference between the lower purchase price (corresponds to the present value, discounting) or issue value (e.g. EUR 55 in 2002) and the higher repayment price or redemption value (e.g. EUR 80 in 2012 ).
(also known as zero coupon bond) is a fixed-rate bond that does not pay interest during the term. Interest and compound interest are accumulated and only paid out together with the loan amount when the bond matures. Since the interest payment is only made once at the end of the term, the creditworthiness requirements for the bond debtor are higher than for a normal bond. A distinction must be made between
(1) real zero bonds (see zero bond, real) and
(2) Incremental Bonds (Interest Collectors).
See also zero coupon bond, zero bond, zero coupon bond.
Zero coupon bonds (usually issued by international financial institutions). Fixed income bonds on which no interest is paid during the term. The return results from the difference between the issue (purchase) price and the redemption (sale) price. Two variants have prevailed on the financial market. (1) Compound interest bonds or (English) capital growth bonds, the repayment of which is made including interest and compound interest. (2) Discount bonds with an issue price below par. The buyer pays a price reduced by the discount and receives the full face value back at the end of the term (see discounting papers). S. a. Strips.
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