Glossary

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Zero bond

A debt security that pays no interest payments. Instead it is issued at a large discount to its nominal value. In other words, at the beginning of the investment, a relatively small amount must be paid which then progressively increases in reflection of interest and compound interest on the amount until the nominal value of the zero bond is reached at maturity. The longer the term to maturity (or the higher the yield), the lower the issue price.
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