CAF-7 · Chapter 8 · Question 5 of 15
Which of the following is a key characteristic of a 'Zero-Coupon Bond'?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) It is sold at a significant discount to its face value, and the investor’s return is gained entirely through capital appreciation at maturity
Explanation
Zero-coupon bonds do not pay any periodic interest (coupons). Instead, they are issued at a deep discount and redeemed at full face value, providing return through capital appreciation.
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