non-interest-bearing note

Definition

A bond which pays no coupons, is sold at a deep discount to its face value, and matures at its face value. A non-interest-bearing note has the important advantage of being free of reinvestment risk, though the downside is that there is no opportunity to enjoy the effects of a rise in market interest rates. Also, such bonds tend to be very sensitive to changes in interest rates, since there are no coupon payments to reduce the impact of interest rate changes. In addition, markets for non-interest-bearing notes are relatively illiquid. Under U.S. tax law, the imputed interest on a non-interest-bearing note is taxable as it accrues, even though there is no cash flow. also called zero-coupon bond.

Use this term in a sentence

The non-interest-bearing note was a cool bond and it had a certain function that worked very well and did the right job.

​ Was this Helpful? YES  NO 4 people found this helpful.

By purchasing a non-interest-bearing note, the frugal man was assured of a safe, but low yielding investment; he did not lose thereby, nor did he take advantage of raising interest rates.

​ Was this Helpful? YES  NO 6 people found this helpful.

non-interest-bearing note A bond which pays no coupons, is sold at a deep discount to its face value, and matures at its face value. A non-interest-bearing note has the important advantage of being free of reinvestment risk, though the downside is that there is no opportunity to enjoy the effects of a rise in market interest rates.

​ Was this Helpful? YES  NO 7 people found this helpful.

Show more usage examples...

Browse by Letter: # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
non-interest-bearing account non-investment grade