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Thursday, September 3, 2015

What Are Deep Discount Bonds?

Deep Discount Bonds are similar to Zero Coupon Bonds. They do not carry any coupon rate i.e investors of Deep Discount Bonds do not receive regular interest payments.

Deep Discount Bonds are generally issued at a discount (i.e at a price lower than the face value) and redeemed at par value. It is this difference between the purchase price of these bonds and the par value that signifies earnings for their investors.

Deep Discount Bonds too do not carry any reinvestment risk.

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