Which of the following statements about zero coupon bonds is FALSE?
A) When the bonds mature,the issuing firm is faced with a small cash outflow relative to the cash inflow the firm receives when the bonds are initially issued.
B) Zero coupon bonds are disadvantageous to the issuing firm if interest rates fall.
C) Yields tend to be bid down on zero coupon bonds due to investor demand for the bonds.
D) Zero coupon bonds provide a positive annual cash flow to the issuing firm over the life of the bonds.
Correct Answer:
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