A Zero-Coupon Bond is a bond that does not pay regular interest during its lifetime. Instead, it is issued at a discount to its face value and pays the full amount when it reaches maturity.

For example, an investor may purchase a bond for €800 and receive €1,000 at maturity. The difference represents the investor’s return.

Zero-coupon bonds are commonly used for long-term financial planning because the future payout is known in advance, although their prices can be sensitive to changes in interest rates.