Investment VehiclesQuestion 29 of 110
Which of the following best describes a zero-coupon bond?
a.It is issued at a discount and pays no periodic interest, maturing at par
b.It pays a higher coupon than comparable bonds
c.It pays interest monthly rather than semiannually
d.It cannot be issued by the U.S. Treasury
Explanation
A zero-coupon bond is sold at a deep discount and makes no periodic interest payments, returning full par value at maturity. The investor's return is the difference between the purchase price and par. Treasury STRIPS are a common example of zero-coupon instruments.
Practice all 110 questions free — no signup required.
Related questions on this topic
- A call option gives the holder which right?
- An investor who buys a put option is generally expressing which market view?
- A fixed annuity differs from a variable annuity primarily because a fixed annuity:
- A hedge fund is typically offered to which type of investor and under what structure?
- A real estate investment trust (REIT) must generally distribute what portion of its taxable income to shareholders to maintain favorable tax treatment?
- Which bond carries the greatest interest rate risk, all else equal?
Last reviewed: · editorial process
PrepPass Editorial Team · Verified against NASAA Series 65 Investment Adviser Law Exam · How we review