Question

Which of the following statements is​ false?

A.The bond certificate typically specifies that the coupons will be paid periodically until the maturity date of the bond.
B.Usually the face value of a bond is repaid at maturity.
C.The bond certificate indicates the amounts and dates of all payments to be made.
D.The only cash payments the investor will receive from a zero coupon bond are the interest payments that are paid up until the maturity date.

Answer 1

The false statement is D. Zero coupon bonds do not pay regular interest payments to the investor.

Step-by-step explanation:

The false statement is D. The only cash payments the investor will receive from a zero coupon bond are the interest payments that are paid up until the maturity date.

Unlike regular bonds, zero coupon bonds do not pay regular interest payments (coupons) to the investor. Instead, these bonds are sold at a discount to their face value and the investor receives the face value of the bond at maturity. The investor does not receive any cash payments during the term of the bond.

For example, if a zero coupon bond with a face value of $1,000 is sold at a discount for $900, the investor will not receive any cash payments until the maturity date, when they will receive the full face value of $1,000.