Which statement is true regarding zero coupon bonds?
A)They provide cash interest payments during their life.
B)They are sold for more than the face or maturity value.
C)The investor determines their market value at the issuance date by calculating the present value of their maturity value,using the market rate of interest for bonds having similar terms and risks.
D)They are also called callable debentures.
E)They are also called junk bonds.

Question

Quizplus · Accepted Answer

Zero coupon bonds do not provide cash interest payments during their life, they are sold at a discount to the face value, and they are not callable debentures or junk bonds. The market value of zero coupon bonds is determined at issuance by calculating the present value of their maturity value using the market rate of interest for bonds having similar terms and risks.

Which Statement Is True Regarding Zero Coupon Bonds