How are zero coupon bonds sold?

Zero coupon bonds are sold below their redemption value because they do not make periodic interest payments like traditional bonds. Instead, these bonds are issued at a discount to their face value, and investors receive a single payment at maturity that is equal to the face value. This structure allows investors to benefit from the growth of their investment over time, as the difference between the purchase price and the redemption value represents the interest earned.

For context, zero coupon bonds appeal to investors who do not need income until maturity, making them an attractive option for long-term saving goals. The unrealized interest accrues over the bond's life, which is why these bonds are sold below the redemption value.