SIE practice questionmediumZero-Coupon Bonds
A zero-coupon bond offers which of the following advantages to investors planning for a future event such as college funding?
- AProtection from all default risk
- BRegular interest payments
- CA known amount at maturity✓ Correct answer
- DTax-free accrual for all investors
Explanation
Why C — A known amount at maturity
Zeroes provide a guaranteed maturity value, useful for planning. They do not pay interest until maturity, may have default risk, and are not always tax-free.
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