If you hold a zero-coupon bond to maturity, the fully compounded rate of return is virtually guaranteed to be equal to the rate stated at the time the bond was purchased.

Question

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Zero-coupon bonds do not make regular interest payments like traditional bonds. Instead, they are typically sold at a discount to their face value and pay off the full face value amount at maturity. Therefore, the fully compounded rate of return for holding a zero-coupon bond to maturity is essentially locked in at the time of purchase, making the statement true.

If You Hold a Zero-Coupon Bond to Maturity, the Fully