Bonds are the financial instrument issued for a period of more than 1 year with purpose of raising capital by borrowing.Bonds are of different – different types but two main type of bond is : 1) Inflation Index Bond 2) Zero Coupon Bond.
Inflation Index Bond is a bond where principal and coupon amount are adjusted to compensate the investor against inflation rate change in market. It is also known as inflation linked bond and real return bond.These are designed to cut out the inflation risk of an investor. These are issued at face value.
Zero Coupon Bond is a bond that doesn’t pay any interest or coupon amount and instead pay one lump sum value at maturity. It is the most simplest bond type in the market. These are issued at discounted price and redeem at face value.