Deep discount bonds and zero coupon bonds

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January 27, 2017 at 8:16 pm #369984
Candy
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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
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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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