Advanced Search

Types of Bonds

Zero Coupon Municipal Bonds Glossary

Accreted value
The current value of a zero coupon municipal bond, taking into account interest that has been accumulating and automatically reinvested in the bond.
A promise to pay the principal amount plus interest due on a specific date.
Callable bonds
Bonds that are redeemable prior to the specified maturity date at a specified price at or above par (or at or above their accreted value, for zero coupon bonds).
Failure to pay principal or interest when due.
The amount by which the purchase price of a bond is less than the principal amount or par value. In the case of a zero coupon bond, a discount is measured from the accreted value based on the original issuance.
Double and triple tax-exemption
Securities that are exempt from state and local taxes, or state, local and federal income taxes are said to have double tax-exemption, or triple tax-exemption, respectively.
Compensation paid or to be paid for the use of money, generally expressed as an annual percentage rate.
A state, political subdivision, agency or authority that borrows money through the sale of bonds or notes.
A measure of the ease with which a security can be sold.
The date when the face amount of a bond becomes due and payable.
Original issue discount bond
A bond issued at a price less than par which qualifies for special treatment under federal tax law. Under that law, the difference between the issue price and par value to be treated as tax-exempt income rather than capital gain if the bonds are held to maturity.
Par value
The principal amount or face amount of a bond or note due at maturity.
The face amount of a bond, exclusive of accrued interest and payable at maturity.
Redemption premium
 In the case of zero coupon bonds, the amount by which the call price exceeds the accreted value.
Secondary market
The market for issues previously offered or sold. There are more than 2,040 banks and brokerage firms across the country that are registered to sell municipal bonds. An estimated $19.4 billion in municipal bonds are traded daily in the secondary market.
Zero coupon bond
A bond for which no periodic interest payments are made. The investor receives one payment at maturity, equal to the principal invested plus interest earned, compounded semiannually, at the original interest rate to maturity.

All information and opinions contained in this publication were produced by the Securities Industry and Financial Markets Association from our membership and other sources believed by the Association to be accurate and reliable. By providing this general information, the Securities Industry and Financial Markets Association makes neither a recommendation as to the appropriateness of investing in fixed-income securities nor is it providing any specific investment advice for any particular investor. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and sources may be required to make informed investment decisions.