A zero-coupon bond (or sometimes called deep discount bond) is a type of fixed income that makes no regular interest payment but is sold at a steep discount from its face amount. When the bond matures, the investor receives the full face amount. The difference between the purchase price and the face value is the return. Calculating zero-coupon bond price is crucial for determining its fair value and potential return on investment.
Bond pricing is essential for investors, financial analysts, and portfolio managers to make informed decisions, manage risks, and optimize returns.