Zero-coupon bond

New York Federal Reserve: Zero Coupons and STRIPS
 * Zero-coupon bonds or “zeros” result from the separation of coupons from the body of a security.
 * Zeros sell at discounts from face value.
 * The difference between the purchase price of the zero and its face value when redeemed is the investor's return.
 * Zeros can be purchased from private brokers and dealers, but not from the Federal Reserve or any government agency.

Treasury STRIPS
[WRITE ME]

Zero-coupon Corporate Bonds
[WRITE ME]

Zero-coupon Municipal Bonds
[WRITE ME]

Tax Aspects
[WRITE ME]

Zero-coupon Bond Funds
American Century offers four Target dated zero-coupon bond funds, all set to mature and liquidate by a set maturity target date.
 * American Century Target 2010 (BTTNX), expense ratio (0.57%)
 * American Century Target 2015 (BTFTX), expense ratio (0.57%)
 * American Century Target 2020 (BTTTX), expense ratio (0.57%)
 * American Century Target 2025 (BTTRX), expense ratio (0.57%)

Vanguard offers an index fund, the Vanguard Extended Duration Treasury Index Fund, based on the Barclays Capital U.S. Treasury STRIPS 20–30 Year Equal Par Bond Index. Unlike the American Century funds, this fund has no set maturity date. The fund is only available in institutional and ETF shares.

Links

 * Treasury Direct: STRIPS
 * Investing in Bonds: Zero-coupon Municipal Bonds

Papers

 * Minimizing funded ratio volatility with extended duration bonds