Final answer:
Investors in zero-coupon bonds generally have to declare interest revenue without receiving periodic cash receipts. These bonds do not pay out interest payments to investors on a regular basis, instead, the interest is earned by purchasing the bond at a discounted price and receiving the full face value at maturity.
Step-by-step explanation:
Investors in zero-coupon bonds generally have to declare interest revenue without receiving periodic cash receipts because zero-coupon bonds do not pay out interest payments to investors on a regular basis. These bonds are issued at a discount to their face value and pay no periodic interest. Instead, investors earn interest by purchasing the bond at a discounted price and receiving the full face value at maturity. For example, if an investor buys a $1000 zero-coupon bond at a discounted price of $800, they will receive $1000 at maturity, resulting in $200 as interest revenue.
Since zero-coupon bonds do not provide periodic cash payments, it is common for investors to hold them until maturity. This allows investors to receive the full face value of the bond and maximize their returns. The lack of periodic cash receipts in zero-coupon bonds means that investors do not have to worry about reinvesting the interest payments and can plan their financial strategies accordingly.