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

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A zero coupon bond is a type of bond that does not make any periodic interest payments to the investor. Instead, it is sold at a discount from its face value and then pays the entire face value at maturity. Because no interest payments are made, the issuer can deduct the interest that accrues each year as a tax-deductible expense, even though it does not actually have to pay any interest until the bond matures. This can be an attractive option for issuers who want to defer payment of interest until a later date.

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