In the early 1980s, at a time when interest rates were at historical highs, investment banking firms introduced a security backed by US government bonds that paid no annual interest (referred to as zero-coupon bonds), with all of the interest to be paid at the bonds maturity date. The securities were given names such as TIGRS (Treasury Income Growth Receipts, a Merrill Lynch product), CATS (Certificates of Accrual on Treasuries, a Salomon Brothers product), and LIONS (Lehman Investment Opportunity Notes, a Lehman Brothers product).

Why do you think securities with this feature were introduced at that time?

Too often it was stated that these securities had no risk. What risks does an investor face when purchasing such securities?