Zero Interest Bonds Debentures
Also known as zero coupon bonds/debentures, ZIBs do not carry and explicit/coupon rate of interest. They are sold at a discount from their maturity value. The difference between the face value of the bond and the acquisition cost is the gain/ return to the investors. The implicit rate of return/interest on such bonds can he corn outed by Equation 19.1.
Acquisition price – Maturity (face) value/( 1 + i)
Where i = rate of interest
n = maturity period (years).