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Zero-coupon bonds are discount securities, i.e. the interest on the bond is not paid until the bond matures. Zero bonds are issued at a discount of up to 25 percent below their face value, and are redeemed at their face value upon maturity. The interest rate is calculated on the basis of the difference between the purchase price and the face value. Zero-bonds are useful to investors as a means of reducing their tax burden because the interest is not taxable until the bond matures. One risk associated with zero-coupon bonds is that if the issuer were to become insolvent, the investor would forfeit all profit on the bond; moreover, counterfeit zero-bond certificates are often not discovered until the end of the maturity period.
The ZEW economic expectations are surveyed on a monthly basis. Since 1991, some 350 financial market experts – comprising 80 percent banking professionals, 15 percent insurance experts and 5 percent industry representatives – have participated in the survey. The indicator reflects the difference between positive and negative forecasts for the future economic development in Germany – for the following six months to come. For instance: if 30 percent of the survey participants are of the opinion that the economic situation will worsen during the following six months, with 40 percent believing in an improvement, this would result in an economic expectation of 10 points. Those who do not expect a change in the economic situation are not included in this result.