Zero-coupon bonds are debt securities that do not pay interest during their life and are issued at a discount to their face value. Instead of periodic interest payments, the bondholder receives a single payment at maturity that is equal to the bond's face value, which reflects the accumulation of interest over time. These bonds are closely linked to the term structure of interest rates, as their prices vary with changes in interest rates and provide insight into the expectations for future rate movements.
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