Zero-Coupon Bonds:
The Power Finance Corporation withdrew zero-coupon bonds issuance due to weak investor demand.
- These are a debt instrument that does not pay periodic interest but is issued at a discount rate to its face value.
- These are also known as discount bonds, are issued at a discount on the bond’s face value and do not pay periodic interest to bondholders.
- They offer payment at face value at maturity so zero-coupon bonds tend to fluctuate in price on the secondary market much more than coupon bonds
- Advantages of Zero Coupon Bonds
- Varied investment horizon:These bonds suit investors with long-term and short-term investment motives.
- Less risky:These bonds are considered less risky than coupon bonds, as the investors have to buy and leave them until maturity.
- Disadvantages of Zero Coupon Bonds
- Period:It is only suited for long-term investment purposes. People with short-term motives cannot invest in these bonds.
- No regular income:The investor does not get a fixed, steady income from such bonds.
