Asked by Laken Guzic on Jul 14, 2024
Verified
A bond that pays no separate interest payments is called a(n) :
A) Premium bond.
B) Coupon bond.
C) Junk bond.
D) Zero-coupon bond.
E) Investment grade bond.
Zero-Coupon Bond
A debt security that does not pay periodic interest, instead being sold at a discount and maturing at face value, generating profit at redemption.
Interest Payments
The cash outflows that a borrower makes to a lender as a compensation for the use of borrowed funds.
Premium Bond
A bond that is trading above its par value in the financial markets.
- Define and differentiate between various types of bonds based on payment and structure.
Verified Answer
AB
Abigail BrackeenJul 15, 2024
Final Answer :
D
Explanation :
A zero-coupon bond does not pay interest (coupon) periodically. Instead, it is sold at a discount to its face value and pays its face value at maturity.
Learning Objectives
- Define and differentiate between various types of bonds based on payment and structure.