SIE practice questioneasyZero-Coupon Bonds
Which statement is TRUE of zero-coupon bonds?
- AThey make monthly interest payments.
- BThey pay no periodic interest before maturity.✓ Correct answer
- CThey have lower interest rate risk than coupon bonds.
- DThey always trade at par.
Explanation
Why B — They pay no periodic interest before maturity.
Zero-coupon bonds pay no periodic interest and are issued at a discount; they have higher, not lower, interest rate risk and never trade at par initially.
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