Zero-Coupon Bond

This ain’t your mom’s grocery store coupons.

When we’re talking bonds, “coupons” are the regular interest payments you get from owning a bond. They’re usually not much compared to stocks, but that’s what you get for buying a safer security.

Hold up...why would someone buy a bond that gives out zero interest payments? Well, zero coupon bonds are sold at a discounted price. Basically, they’re on sale. Mom would be on board.

Over time, the bonds will finish appreciating to reach their face value, at which point they're sold. So it’s like buying some soda on sale, then selling it back to the public after it stops being on sale, at its original price.