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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Zero coupon loan notes
Hi sir
Can you emphasise on the difference between traditional loan notes and zero coupon
The only difference is that zero coupon bonds pay zero interest (the coupon rate is the interest rate). As I explain in my lectures, investors will accept a lower interest rate if instead they are paid a premium on redemption. The lower the interest rate the higher the premium on redemption. If the interest rate is zero then the premium will be a lot bigger.
Thankyou sir
You are welcome 🙂