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Deep discount bonds and zero coupon bonds

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Deep discount bonds and zero coupon bonds

  • This topic has 1 reply, 2 voices, and was last updated 8 years ago by John Moffat.
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  • January 27, 2017 at 8:16 pm #369984
    Candy
    Member
    • Topics: 135
    • Replies: 79
    • ☆☆☆

    Mr Moffat,

    I have watched the lecture but am still unsure about the difference between the 2, can you please explain?

    Is it just that deep d.b receive very low interest whereas zero c.b do not receive any until redeemed?

    Thank you

    January 28, 2017 at 7:38 am #370015
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54805
    • ☆☆☆☆☆

    Exactly, deep discount bonds have a very low coupon rate, and zero coupon bonds pay no interest at all.

    Instead, there is a very large premium on redemption.

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