do not issue zero-coupon bonds in Canada. With computerization came the ability for investment dealers to separate and sell each distinct component as independent investments. The investment dealer holds the physical bond certificate, separates or strips the periodic payments or coupons from the bond, and markets the two components separately. The bond issues used are not necessarily the ones with the remaining time to maturity that is the closest to the indicated term and may differ from other sources. Upon the zero-coupon bonds maturity, the accounts Summary of Capital Transactions will include the difference between the purchase price and the bonds maturity value as taxable income. An Empirical Analysis of the Canadian Term Structure of Zero-Coupon Interest Rates. Attached to each certificate were coupons that represented all the future periodic interest payment to be paid to the investor. These are then sold separately to investors at a discount to their face values, with the bond residual component trading as a stripped zero-coupon bond and each coupon also trades as a stripped zero-coupon bond. Example: Lets assume an investor purchases a zero-coupon bond with the following characteristics: Face/Maturity Value: 10,000.00, maturity Date: 15 November 2018, purchase Price: .81 per 100 face value. 2 year - 2020.08.01, 1,75 (2018.07.19 3 year - 2021.03.01,.75 (2018.01.25 5 year - 2023.03.01,.75 (2018.02.15 7 year - 2024.06.01,.50 (2017.05.03 10 year - 2028.06.01,.00 (2018.04.26 Long - 2048.12.01,.75 (2016.11.24 RRB - 2044.12.01,.50 (2015.04.07 Affiliate Sites Follow the Bank).
Zero coupon bonds offer the following features: Safety, your investment is backed by the full faith and credit of the issuer as to the payment of the face amount at maturity. As the names for these bonds suggest, a zero-coupon bond has no periodic interest payments. If a zero-coupon bond is sold prior to its maturity date, part of the difference between the purchase price and the sale price of the bond is considered deemed interest income, and part is considered either a capital gain or a loss depending on the. please note that any data missing because of holidays or data problems, such as lack of bond-pricing data (e.g., are shown as "na."). A zero-coupon bonds characteristics are very similar to those of the Government of Canada Treasury Bills except that a zero-coupon bond can have a maturity date that exceeds one year. The data are expressed as decimals (e.g. Unlike other bonds, zero coupon bonds do not pay interest regularly.