What Is Deferred Interest?

Deferred interest bond A debt instrument that can pay interest on a specific date in the future. Unlike most bonds, deferred interest bonds do not pay coupons until they mature, and their interest is paid once on the bond's maturity date. For example, a one-year deferred interest bond with a face value of 500 yuan and an annual yield of 6% will be paid to investors at the maturity date at 530 yuan (500 yuan principal plus 30 yuan interest).

Deferred interest bond

A debt instrument that pays interest only upon maturity. Unlike most bonds, a deferred interest bond does not make periodic, or "coupon," payments over its lifetime. Instead, the interest accrues and is paid out when the bond expires (matures). For example, a one-year deferred interest bond that has a par value of $ 500 and an annual yield of 6% would pay the investor $ 530 when the year was up (the initial $ 500 investment plus $ 30 in interest).

Zero coupon bonds are one type of deferred interest bonds.