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What is a zero-coupon note?
A zero-coupon note is a note which pays at maturity the value of the note with no separate interest payments.
What is coupon rate?
Coupon rate is simply just the annual coupon payments paid by the issuer relative to the bond's face or par value.Coupon rate can be calculated by dividing the sum of the security's annual coupon payments and dividing them by the bond's par value. For example, a bond which was issued with a face value of $1000 that pays a $25 coupon semi-annually would have a coupon rate of 5%.Source: investopedia
What is the coupon value?
The coupon value is usually 1/000 of a cent. They can also be 1/20 or 1/1000 of a cent. The face value is how much the coupon takes off your bill.
Assume that all interest rates in the economy decline from 10 percent to 9 percent what bonds will have the largest percentage increase in price?
A 10-year zero coupon bond.Source: http://www.transtutors.com/homework-help/corporate-finance/bond-valuation/
When market interest rates exceed a bond's coupon rate the bond will?
When market interest rates exceed a bond's coupon rate, the bond will:
What is a zero-coupon note?
A zero-coupon note is a note which pays at maturity the value of the note with no separate interest payments.
Is zero coupon bond more sensitive to change in interest rate than fixed coupon bond?
The zero coupon bond is more sensitive to change in rate (inflation) because the market value is not based on a fixed coupon.
How do bondholders get a return on zero coupon bonds?
Zero coupon bonds do not pay interest and are therefore sold at a steep discount to face value depending on the maturity date of the bond. Due to the time value of money, the discount on a 30 year zero coupon bond will be much greater than on a 10 year zero coupon bond. At maturity bondholders will receive the full face value of the bond which provides bondholders a return. For example, a 30 year zero coupon bond with a face value of $1,000 and sold for $500 would return a $500 profit after 30 years. Holders of zero coupon bonds can sell the bonds at any time before maturity. If an investor bought zero coupon bonds prior to a steep drop in interest rates, the value of the zero coupon bonds would increase and could be sold at a profit.
PV of 31 year zero coupon bond with a YTM of 8 par Value 1000?
present value zero coupon=1000/(1.08)31
What is the taxation of zero coupon bonds held to maturity?
Zero coupon bonds issued by the US Treasury are issued at a discount to face value. An investor holding zero coupon bonds is paid the full face value when the zero coupon bond matures. The difference between the purchase price and the maturity value is know as the original issue discount which represents the interest earned on the zero coupon bond. Although a zero coupon bond does not pay annual interest, an investor must pay taxes each year based on the imputed receipt of income. Since the investor is not receiving interest payments during the life of the bond, taxes would be paid on interest income not actually received until bond maturity. Due to the yearly tax liability on imputed interest, it makes sense for most investors to hold zero coupon bonds in a tax deferred retirement account. The interest earned on zero coupon bonds issued by the US Treasury are exempt from state and local taxes.
What are the interest rates for zero coupon bonds?
They pay no 'coupon' which is the income paid periodically. You make a return by buying at a discount. As an example, if you buy a zero coupon bond for $86.26, maturing at $100 over 5 years, you would earn 3% p.a.
What has the author Donald R Nichols written?
Donald R. Nichols has written: 'The new Dow Jones-Irwin guide to zero coupon investments' -- subject(s): Zero coupon securities
How is Modified Duration calculated for a Zero Coupon Bond?
3 years zero coupon bond. face value $100 and present market value $75. What will be its Macualay Duration and Modified Duration?
What is a Zero coupon bond?
A zero-coupon bond is a bond bought at a price lower than its face value, with the face value repaid at the time of maturity. It does not make periodic interest payments, or have so-called "coupons," hence the term zero-coupon bond.
Distinguish between deep discount bond and zero coupon bond?
the main difference between deep discount bond and zero coupon bond is that in case of zero coupon bond no int is payable periodically while in case of deep discount bond int is payable periodically at very lower rate say 2% per annum
How much would it be if you spent 30 but had a coupon for 0 off?
You would not get a discount at all because you said that the coupon is fro zero off.
Is a zero coupon bond a junk bond?
depends on the collateral supporting the bond.
