capital appreciation bond

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Zero-Coupon Bond

A bond that pays no interest. It is sold at a discount from par and matures at par. These are fairly illiquid investments because they do not benefit from changes in interest rates. However, they tend to be low-risk. Zero-coupon bonds fluctuate in price, sometimes dramatically, with changes in interest rates. Sometimes zero-coupon bonds are issued as such; other times they are bonds stripped of their coupons by a financial institution and resold as zero-coupon bonds. A zero-coupon bond is less formally known as a zero.

capital appreciation bond

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19, 2015) [hereinafter Zero Coupon Bonds], In contrast, a capital appreciation bond is a bond in which the return on the initial principal amount (or purchase value) is reinvested until the bond matures.

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