Zero coupon bonds are an attractive option for investors who seek a fixed-income investment with a low risk of default 

Unlike traditional bonds that pay regular interest payments, zero coupon bonds are issued at a discount to their face value and do not pay any interest 

Instead, the bondholder receives a lump sum payment at the maturity date, which includes the initial investment plus interest 

While zero coupon bonds offer a predictable cash flow and a high level of safety, they are still exposed to duration risk 

Duration risk is the risk associated with changes in interest rates and how they affect the price of a fixed-income security 

Duration gauges how sensitively an investment’s price responds to changes in interest rates 

A bond’s price decreases as interest rates increase and increases when interest rates decrease 

The longer the duration of a bond, the greater the price sensitivity to interest rate changes