Zero coupon bond is a type of bond that does not distribute annual return in the form of interest income, but instead, re-invests the sum towards the maturity face value of the bond and reflects the gain in terms of price appreciation. Therefore, such bond is sold at a deep discount price.

Example:

Suppose Miss Lee had invested in a Zero Coupon Bond in Mar 2007, and the bond will mature in March 2013, with a Face Value of US$200,000 and with a discount value of 24.82%. Then the required principal to invest will be:

Required principal for investment: US$150,400 (=US$200,000 x 75.2%)

Yearly return = 4.86%

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This page is for information and reference purpose only. Shanghai Commercial Bank (“the Bank”) makes no warranty as to the accuracy or completeness of information provided herein. It neither constitutes a solicitation nor an offer with respect to the purchase or sale of any security. Bond investments are not bank deposits and involve risks, including the possible loss of the principal amount invested. Investors investing in bonds denominated in non-local currency should be aware of the risk of exchange rate fluctuations that may cause a loss of principal. Unless specified, these investments are not obligations of or guaranteed by the Bank. US persons are not eligible. Bond prices may go down as well as up. The Bank accept no liability for any direct or consequential loss arising from this page. The Bank does not guarantee the existence of a secondary market for bonds.