how do zero coupon bonds work 
zero coupon bonds are deeply discounted debt securities unlike other bonds these bonds do not pay investors any interest in exchange for a lower value and no interest bondholders receive the full face value of the bond when it matures for instance a company may sell a zero coupon bond with a face value of 1 000 for only 850 this bond may mature within a year but offers no interest payment before maturity some issuers may offer zero coupon bonds right off the bat while others may be forced to do so down the road if their financial situation changes 