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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
has invested Rs. 920/- in a zero
 coupon. Let us further assume
  that after 1 year he would
      receive Rs. 1000/- .
In the instant case Rahul pays
 Rs. 920/- (Discounted price)
    and he would receive
 Rs. 1000/- (Par value) after
           1 year.
Return (yield) on the bond
for Rahul is 8.70% and can
   be arrived as follows
     (1000 – 920) / 920
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.
Hope you have understood the
Concept of Zero Coupon Bond


Please give us your feedback at
   professor@tataamc.com
Disclaimer
    The views expressed in these lessons are for information
          purposes only and do not construe to be of any
  investment, legal or taxation advice. They are not indicative of
     future market trends, nor is Tata Asset Management Ltd.
    attempting to predict the same. Reprinting any part of this
       presentation will be at your own risk and Tata Asset
    Management Ltd. will not be liable for the consequences of
                          any such action.




Mutual Fund investments are subject to market risks, read all scheme
related documents carefully.

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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
  • 9. Disclaimer The views expressed in these lessons are for information purposes only and do not construe to be of any investment, legal or taxation advice. They are not indicative of future market trends, nor is Tata Asset Management Ltd. attempting to predict the same. Reprinting any part of this presentation will be at your own risk and Tata Asset Management Ltd. will not be liable for the consequences of any such action. Mutual Fund investments are subject to market risks, read all scheme related documents carefully.