If you feel interest rates are going to drop significantly, you could potentially realize large capital gains by purchasing long-term zero coupon bonds prior to the rates decreasing.

Question

Quizplus · Accepted Answer

When interest rates drop, the value of existing bonds with higher interest rates increases, and since zero coupon bonds pay no interest but are purchased at a deep discount, their price can increase significantly, leading to potential large capital gains.

If You Feel Interest Rates Are Going to Drop Significantly