What financial characteristic is associated with Zero-coupon Bonds?

Zero-coupon bonds are characterized by the fact that they do not make periodic interest payments during the life of the bond. Instead, they are sold at a discount to their face value, and the principal amount is paid in full upon maturity. This means that the only cash inflow to the investor occurs at the end of the bond's term when the principal is returned.

The nature of zero-coupon bonds allows investors to benefit from the difference between the purchase price and the face value received at maturity, which serves as the bond's yield. This structure makes them attractive for long-term investment strategies, particularly for those who do not require immediate income. By focusing on the principal being paid at maturity, one recognizes the distinctive feature of zero-coupon bonds as a financial instrument compared to other types of bonds that provide periodic interest payments.