Which of the following statements is FALSE?
A)The amount of each coupon payment is determined by the coupon rate of the bond.
B)Prior to its maturity date,the price of a zero-coupon bond is always greater than its face value.
C)The simplest type of bond is a zero-coupon bond.
D)Treasury bills are U.S.government bonds with a maturity of up to one year.

Question

Quizplus · Accepted Answer

Prior to its maturity date, the price of a zero-coupon bond is always lower than its face value. This is because zero-coupon bonds do not make any coupon payments, so the investor only earns a return based on the difference between the purchase price and the face value at maturity. As time passes, the discount is reduced and the price of the bond increases, eventually reaching its face value at maturity.

Which of the Following Statements Is FALSE