Q569
Type of bonds that pays no coupon payment but provides little appreciation are classified as
A.
depreciated bond
B.
interest bond
C.
zero coupon bond
AnswerD.
appreciation bond
Answer: Option C
Solution
Answer: Option C
Solution:
Type of bonds that pays no coupon payment but provides little appreciation are classified as zero coupon bond. A zero-coupon bond is a bond where the face value is repaid at the time of maturity. Note that this definition assumes a positive time value of money. It does not make periodic interest payments, or have so-called coupons, hence the term zero-coupon bond.