How to Calculate Interest on Zero Coupon Bond is a financial computation technique used to determine the interest earned on a bond that pays no periodic interest (coupons). Instead, the full amount of interest is paid at the bond’s maturity date.
Understanding how to calculate interest on zero coupon bonds is essential for investors seeking alternative investment options. These bonds offer the benefit of capital appreciation as their value increases closer to maturity. Historically, zero coupon bonds emerged during the 1980s and have gained popularity as a tax-efficient investment strategy.