Difference Between Zero Coupon Bonds and Deep Discount Bonds
5paisa Capital Ltd
Last Updated: 23 Jul, 2025 07:00 PM IST

Content
- Deep discount bonds example:
- What is a zero coupon bond?
- Zero discount bonds example:
- Difference between Zero coupon bonds vs deep discount bonds
- Deep discount bonds & Zero Coupon Bonds calculation:
Understanding the distinctions between zero coupon bonds and deep discount bonds is essential for investors navigating the bond market. These bonds, while both sold at a discount, offer unique features and implications.
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Frequently Asked Questions
Investing in deep discount bonds can offer potential higher returns due to their lower initial investment cost and potential for capital appreciation.
A call provision allows the issuer to redeem a deep discount bond before maturity at a predetermined price.
Issuers may call back deep discount bonds for early redemption to take advantage of favorable market conditions or to refinance debt.
Investors should consider the issuer's creditworthiness, prevailing interest rates, and potential tax implications to make informed investment decisions.
While deep discount bonds may offer higher potential returns, they also carry higher risks. Therefore, they may not be suitable for conservative investors seeking stable income streams. Investors should assess their risk tolerance and investment objectives before investing in deep discount bonds.