The advantage of a zero-coupon bond to an investor is that the annual increase in the bond is taxable as ordinary income.

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The advantage of a zero-coupon bond to an investor is that it is typically sold at a discount to its face value, and the investor will receive the full face value at maturity. This means that the investor can earn a profit without having to receive interest payments along the way, and the annual increase in the bond is not taxable as ordinary income because there are no interest payments to report. Instead, the investor will only pay taxes on the capital gains earned when the bond is sold or at maturity.

The Advantage of a Zero-Coupon Bond to an Investor Is