short-term discount notes

Short-Term Discount Note

A debt security with a maturity of one year or less issued at a discount to its face value. For example, if a short-term discount note has a face value of $1000, it may be issued to the holder at $900. When it matures, the holder receives the full $1000. A short-term discount note does not pay a coupon; rather the difference between the discount and the face value takes the place of the coupon. They are often issued by governments and low risk corporate borrowers. See also: Coupon-Equivalent Yield, Zero-Coupon Bond.

short-term discount notes

The promissory notes issued by municipalities at a discount from face value. Essentially, short-term discount notes are a form of tax-exempt commercial paper.
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