Zero Coupon Bond Legal Meaning and Definition

Here is a simplified definition of the legal term Zero Coupon Bond.

Zero Coupon Bond (noun): A type of financial bond that is bought for a lower price than its actual worth (at a discount) and does not provide interest payments during its lifetime. These bonds are cashed in (redeemed) at their full face value when they reach their end date (maturity date). The profit made is the difference between the price it was purchased for and the price it is redeemed for. This is a way for the investor to earn income without getting regular interest payments.