A bond sold below face value instead of paying interest
A discount bond pays no interest along the way and is instead issued below its face value. The face value comes back at maturity, and the difference is the return. That is a different shape of cash flow from a coupon bond paying every year. Because everything arrives at maturity, it reacts more to interest rates than a coupon bond of the same term.
Buy a bond with a face value of 100 for 95 and receive 100 at maturity, for a gain of 5.
For learning, not investment advice. Decisions are your own.
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