Zero-Coupon Bonds

A zero-coupon bond is a type of debt security issued by governments or companies that does not pay periodic interest. Instead, it is sold at a discount to its face value, and the investor receives the full amount (the face value) at maturity. The interest earned is the difference between the purchase price and the amount received at maturity. Essentially, it's an investment where you pay upfront and receive a lump sum later, with the interest built into the difference between purchase price and maturity value.