why buy zero coupon bonds

pay tax on it until 2013. When the board or governing body approves the plans, a bond can be issued. The 80 return plus coupon payments received on the bond is the investor's earnings or return for holding the bond. Best Answer: "Zero coupon bonds are bonds that do not pay interest during the life of the bonds. That is why most bonds are either issued at either a premium or a discount. Unfortunately, it isnt that easy. You can buy a 100 bond for 50 today. A strip bond has no reinvestment risk because the payment to the investor occurs only at maturity. The coupons and residue are sold separately to investors. When the bond matures, the bondholder is repaid an amount equal to the face value of the bond. Purchasing a municipal zero coupon bond, buying zero coupon bonds in a tax-exempt account, or purchasing a corporate zero coupon bond that has tax-exempt status are a couple of ways to avoid paying income taxes on these securities. In India, the tax on income from deep discount bonds can arise in two ways: interest or capital gains.

Pros and Cons of, zero, coupon, bonds



why buy zero coupon bonds

Why buy zero coupon bonds
why buy zero coupon bonds

References edit a b Mishkin, Frederic. At maturity, it can then be redeemed at its face value allowing the bond holder to make a profit. A zero-coupon bond is also known as an accrual bond. A discounted bond is the opposite. Example, a Zero coupon bond is a bond that sells without a stated rate of interest. Sometimes it can take a few months for the bond to be drafted and actually issued to the public. By the time the bond actually hits the public, interest rates have code promo en ligne wack sport usually changed. The maturity dates on zero coupon bonds are usually long term, with many having initial maturities of at least 10 years.