Question

Bonds that pay no interest and instead issue at a deep discount are commonly referred to as ___ coupon bonds

Answer 1

Zero-coupon bonds are bonds that pay no interest and are issued at a deep discount. Instead of making periodic interest payments, these bonds are sold at a discount and the investor receives the face value of the bond at maturity.

Step-by-step explanation:

Bonds that pay no interest and instead issue at a deep discount are commonly referred to as zero-coupon bonds. Zero-coupon bonds are purchased at a price below their face value and do not make periodic interest payments like traditional bonds. Instead, they are sold at a discount and the investor receives the face value of the bond at maturity.