When issuing 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

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Zero coupon bonds are issued at a discount to their face value and do not pay regular interest payments. Instead, the difference between the discounted price and face value at maturity represents the interest earned. Because no interest payments are made during the life of the bond, the issuer can annually deduct the current year's interest accrual without having to actually pay the interest until the bond matures.

When Issuing A(n) ________ the Issuer Can Annually Deduct the Current