Zero coupon

**Zero coupon**

A **zero coupon** refers to a type of bond or debt security that does not pay periodic interest (coupons) during its life. Instead, it is issued at a significant discount to its face value and pays its full face value at maturity. The investor’s return comes from the difference between the purchase price and the amount received at maturity. Zero coupon bonds are often used for long-term financial goals, and their price can be sensitive to changes in interest rates.