Putting Compound Interest to Work Through Zero Coupon Bonds
In chemistry, a compound substance refers to a combination of two or more elements that cannot be separated. In math, a compound fraction means a fraction that has a numerator, a denominator, or both that contain fractions. In finance, compound interest means an investor is likely to achieve his financial goals sooner. A zero coupon bond, on the other hand, is sold at a discount from its face value and the issuer makes no interest payments during the life of the security. When it matures, he receives the full face amount which equals his initial investment plus accumulated interest compounded over the life of the bond.