ZERO COUPON BONDS Definition

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ZERO COUPON BONDS are bonds priced at a large discount from face value. The bonds mature at full face value so the difference between the original issue price and the face value represents interest income. The issuer of the zero coupon bond saves on cash flow since the interest isnt paid out until the end of the bond holding period.

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AVERAGE COST is total cost for all units bought (or produced) divided by the number of units.

LONG-TERM is a long period of time. In securities, for a bond it is 10 or more years or as it relates to a buy and hold investment strategy. In accounting, it is thought of as being in excess of 12 months, e.g. long-term liabilities. See SHORT-TERM.

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