Describe the zero-coupon bond

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Question - Bonds And Interest Rate Discussion

Bonds are the primary mechanism by which businesses and governments can raise large amounts of money. Most bonds have a coupon rate which determines the annual interest and a maturity. If you have a zero-coupon bond then there is no annual interest so the amount you pay is a significant discount.

1. Describe the "zero-coupon bond." Indicate how it is issued, valued in the market, and which investor should consider a zero-coupon bond.

2. Explain the yield curve and how it reacts to changes in interest rates. Explain why long-term (30-year) bonds generally trade at a higher yield than short-term maturities. Apply the forces of inflation, monetary and fiscal policy, trade deficit, and foreign influences in your explanation. References Manditory.

Reference no: EM133241308

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