A zero coupon bond with a face value of 1000

In a rising interest rate environment, their value is likely to fall more than other bonds.

Suppose you purchase a zero coupon bond with a face value of and a

For individuals, zero coupon bonds may serve several investment purposes. By placing funds in a U. Treasury zero, a parent can be assured that the funds will be fully intact to meet this liability. The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. That may not matter to you.

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The security of knowing you'll receive a fixed amount at a definite date in the future may make up for earning a bit less profit on your investment. Also, if interest rates fall rather than rise over course of your bond's maturation, you may be glad your interest rate is fixed. Either way, there are a lot of variables to consider with zero coupon bonds -- as with any investment.

To learn more about this unique way to play the bond market, and to learn more about bond investing in general, head on over to The Motley Fools' Bond Center for a longer, free tutorial on all things bonds-related. I like things that go "boom. But to tell the truth, over the course of a dozen years writing for The Motley Fool, I have covered -- and continue to cover -- everything from retailers to consumer goods stocks, and from tech to banks to insurers as well.

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Let's conquer your financial goals together See you at the top! Search Search:. Rich Smith. Sep 1, at PM. Article Info. What Is a Zero Coupon Bond?

  • Zero-Coupon Bond.
  • What Is a Zero Coupon Bond?!
  • Suppose you purchase a zero coupon bond with a face value of and a!