A bond that only pays a principal payment at maturity date is known as a(n)
A) blank bond.
B) maturity bond.
C) interest free bond.
D) mini-coupon bond.
E) zero coupon bond.

Question

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A bond that only pays a principal payment at maturity date is known as a zero coupon bond. This bond does not pay any interest (hence the name "zero coupon") throughout its term, but it is sold at a discount to its face value, meaning that the investor can earn a return by purchasing the bond at a lower price and receiving the full face value at maturity.

A Bond That Only Pays a Principal Payment at Maturity