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What are Zero Coupon Bonds

Zero coupon bonds which is also called Kisan Vikas patr in India. These bonds are bought at the price which is less than its written price. For example, a zero coupon bonds written price is $ 10,000 and its maturity time is after 5 years. If it is bought at $ 5000, then it will be zero coupon bond.


There is clear reason behind this. There is no interest given on this type of debt. Company includes all payable interest in it. Principle of debt and interest is payable only on maturity. There are also other type is coupon bonds. Coupon of payable interest and date of payment is attached in coupon interest. So, if there is no coupon of interest attach, it will be zero coupon bonds.

These bonds are called discount bonds because these bonds are bought at discounted value. If bond's maturity face value is $ 100 and it is bought at discounted value at $ 90, so, we are receiving bonds at cheap value. Discount will be equal to interest.

In India, these bonds are not popular but these bonds are bought by public from Govt. with other name like Kisan Vikas Patr for small saving. Now, anyone can double there money in 7.5 years by buying kisan vikas patr which is just like zero coupon bonds.


Related :  Journal Entry for Zero Coupon Bonds

Category : Finance Dictionary

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Accounting Education: What are Zero Coupon Bonds
What are Zero Coupon Bonds
Accounting Education
https://www.svtuition.org/2015/01/zero-coupon-bonds.html
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