A zero coupon bond makes no periodic interest payment, but instead it is usually offered at a discount from its face value. The return will be reflected from the gradual appreciation of the bond which is redeemed at face value on maturity date.
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Mr. Chan bought a zero coupon bond of face value of US$100,000 at a discount value of 20%. This bond will mature on February 10, 2028. The required principal for Mr. Chan will be:
|Principal to Invest US$100,000 x 20% = US$20,000|
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