Question

John Peterson purchased a bond at a price far below its face value; it that makes no interest payments and will be redeemed at its face value at maturity. In all likelihood, he purchased a(n) __________ bond.

a. zero-coupon
b. convertible
c. indenture
d. registered

Answer 1

John Peterson purchased a bond at a price far below its face value; it that makes no interest payments and will be redeemed at its face value at maturity. In all likelihood, he purchased a zero.coupon bond. Option A is correct.

A zero-coupon bond is a debt security that doesn't pay interest (a coupon) but is traded at a deep discount, rendering profit at maturity when the bond is redeemed for its full face value.

Answer 2

In all likelihood, he purchased a "a. zero-coupon" since these are only beneficial to people looking to have very little flexibility in terms of return when it comes to the future of their investment.