Pure discount bond


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Pure discount bond

A bond that will make only one payment of principal and interest. Also called a zero-coupon bond or a single-payment bond.
References in periodicals archive ?
A pure discount bond provides its holder with a single payment upon maturity.
In particular, if the 120-day pure discount bond costs $95 and the interest cost associated with financing a $95 loan for 30 days is $1, then the total cost associated with the buy-and-hold strategy is $96.
The actual return associated with a 120-day pure discount bond 30 days from now, however, is uncertain: The price may turn out to be $96, but it could also be $94 or $98.
Note that the rate we refer to is the rate of return associated with a 90-day pure discount bond that pays $100 at maturity.
Any bond with a large final payment is partly a pure discount bond with a significant portion of its return coming in the form of capital gains or losses over time.
jt] on a j-period nominal pure discount bond into the real price of a promise, sold at time t, to one dollar at time t + j.
jt] is the yield to maturity on a j-period pure discount bond as of December 31 of year t.
The modem theory of the term structure of interest rates prices a coupon bond in three steps: 1) viewing the coupon bond as a bundle of pure discount bonds; 2) unbundling it into the constituent pure discount bonds and valuing these components; and 3) adding up the values of the components to attain the value of the bundle.
Consider an obligation that can be expressed as a T-year pure discount bond.
In the case of a T-year pure discount bond and random force of interest {[y.
0], which generalize the T-year pure discount bond case described in the introduction.
Let P(t,s) denote the price at time t of a pure discount bond paying one at time s, t [is less than or equal to] s.