Zero coupon bond: Difference between revisions
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(ZCB). Securities which pay no intermediate coupons, but only a redemption amount, so that the whole of the return to investors is represented by their capital gain from their investment date to the redemption of the bond at its final maturity. | (ZCB). | ||
This may be beneficial for some taxpayers, especially high-income individuals. | |||
Securities which pay no intermediate coupons, but only a redemption amount, so that the whole of the return to investors is represented by their capital gain from their investment date to the redemption of the bond at its final maturity. | |||
This may be beneficial for some taxpayers, especially high-income individuals. Historically, capital gains have been taxed less heavily than income in many tax systems. | |||
More recently, some of the historical differences in tax treatment - and the related tax planning opportunities - have been reduced. | |||
For example, the UK Corporation Tax treatment is now more aligned with the accounting treatment of spreading the total gain across the whole life of the bond. | |||
== See also == | == See also == | ||
* [[Coupon]] | |||
* [[Coupon bond]] | * [[Coupon bond]] | ||
* [[Reinvestment risk]] | * [[Reinvestment risk]] | ||
| Line 8: | Line 18: | ||
* [[Zero coupon]] | * [[Zero coupon]] | ||
* [[Zero coupon yield]] | * [[Zero coupon yield]] | ||
[[Category:The_business_context]] | |||
[[Category:Financial_products_and_markets]] | |||
Latest revision as of 00:56, 26 May 2021
(ZCB).
Securities which pay no intermediate coupons, but only a redemption amount, so that the whole of the return to investors is represented by their capital gain from their investment date to the redemption of the bond at its final maturity.
This may be beneficial for some taxpayers, especially high-income individuals. Historically, capital gains have been taxed less heavily than income in many tax systems.
More recently, some of the historical differences in tax treatment - and the related tax planning opportunities - have been reduced.
For example, the UK Corporation Tax treatment is now more aligned with the accounting treatment of spreading the total gain across the whole life of the bond.
