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Zero-coupon bonds are those that pay no coupons and thus have a coupon rate of 0%. [ 6 ] [ 7 ] Such bonds make only one payment: the payment of the face value on the maturity date. Normally, to compensate the bondholder for the time value of money , the price of a zero-coupon bond will always be less than its face value on any date of purchase ...
A discount rate [2] is applied to calculate present value. For an interest-bearing security, coupon rate is the ratio of the annual coupon amount (the coupon paid per year) per unit of par value, whereas current yield is the ratio of the annual coupon divided by its current market price.
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If a $100 note with a zero coupon, payable in one year, sells for $80 now, then $80 is the present value of the note that will be worth $100 a year from now. This is because money can be put in a bank account or any other (safe) investment that will return interest in the future.
Related is the concept of "risk return", which is the rate of return minus the risks as measured against the safest (least-risky) investment available. Thus if a loan is made at 15% with an inflation rate of 5% and 10% in risks associated with default or problems repaying, then the "risk adjusted" rate of return on the investment is 0%.
STRK, Strike offers an 8% fixed coupon and a perpetual uncapped call option in a publicly traded security. This overall capital structure is quite unique and designed to broaden our investor base.
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