Which of the following are true for discount bonds?
A) A discount bond is bought at par.
B) The purchaser receives the face value of the bond at the maturity date.
C) U.S. Treasury bonds and notes are examples of discount bonds.
D) The purchaser receives the par value at maturity plus any capital gains.

Question

Quizplus · Accepted Answer

A discount bond is bought at a price below its face value, therefore the purchaser does not receive the face value at maturity but rather a payment that reflects the discount. Choice A is incorrect as the bond is bought below par. Choice C is only partially true as US Treasury bonds and notes can be sold at a discount but can also be sold above par (at a premium). Choice D is also incorrect as the purchaser only receives the par value at maturity, not any potential capital gains.

Which of the Following Are True for Discount Bonds