If a zero-coupon bond sells for par, the nominal interest rate on that bond is:

Question

Quizplus · Accepted Answer

A zero-coupon bond does not pay any interest during its term. It is sold at a discount to its face value, and the difference between the purchase price and the face value represents the interest earned. If a zero-coupon bond sells for par, it means that the purchase price is equal to the face value, which implies that no interest is earned, and therefore the nominal interest rate is zero.

If a Zero-Coupon Bond Sells for Par, the Nominal Interest