Listen to a Business English Dialogue About Zero coupon security
Mark: Hey Lydia, have you ever come across zero coupon securities?
Lydia: No, Mark. What are they exactly?
Mark: Zero coupon securities are bonds that are sold at a discount to their face value and do not pay periodic interest. Instead, investors earn a return through the bond’s appreciation over time.
Lydia: Oh, I see. So, how do investors make money from them?
Mark: Well, Lydia, investors make money by purchasing the bonds at a discount and holding them until maturity, at which point they receive the full face value. The difference between the purchase price and the face value is their profit.
Lydia: That sounds like a straightforward investment strategy. Are there any risks associated with zero coupon securities?
Mark: Yes, Lydia. While they can offer attractive returns, zero coupon securities are sensitive to changes in interest rates and can experience greater price volatility compared to traditional bonds.
Lydia: I see. So, would you recommend investing in zero coupon securities?
Mark: It depends on individual investment goals and risk tolerance, Lydia. Zero coupon securities can be a suitable option for long-term investors looking for potentially higher returns, but they may not be suitable for everyone.
Lydia: Got it. Thanks for explaining, Mark. It’s always good to learn about different investment options.
Mark: You’re welcome, Lydia. Understanding various investment vehicles can help investors make informed decisions and build diversified portfolios.