In utilizing a(n)___________ the issuer can annually deduct the current year's interest accrual without having to actually pay the interest until the bond matures.

Question

Quizplus · Accepted Answer

A zero coupon bond allows the issuer to deduct the interest accrual each year without having to actually pay the interest until the bond matures. This is because a zero coupon bond is sold at a deep discount to its face value and does not make periodic interest payments. The return to the investor comes in the form of the difference between the discounted purchase price and the face value at maturity.

In Utilizing A(n)___________ the Issuer Can Annually Deduct the Current