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VARUN (Student) (52 Points)

02 July 2014

what is the difference between deep discount bonds and zero coupon bonds..?

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Siddharth (Article Assistant) (111 Points)
Replied 02 July 2014

both are same but the names are different. both are issued at discount & matured at FV. & the difference is interest earned by you

JIBIN THOMAS BABU (CA FINAL STUDENT) (147 Points)
Replied 02 July 2014

Deep Discount Bond is technically called a Zero Coupon Bond.

A zero-coupon/deep discount bond is a debt security with no coupon (zero-coupon) or substantially lower coupon than current interest rates
with cumulative option

The difference between a zero-coupon bond and a regular bond is that a zero-coupon bond does not pay coupons, or interest payments, to the bondholder while a typical bond does make these interest payments. The holder of a zero-coupon bond only receives the face value of the bond at maturity.

Zero-coupon bonds are purchased at a large discount, known as deep discount, to the face value of the bond. A coupon-paying bond will initially trade near the price of its face value. Zero-coupon bondholders gain on the difference between what they pay for the bond and the amount they will receive at maturity.

VARUN (Student) (52 Points)
Replied 02 July 2014

Then both are one and the same???

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