Final answer:
Interest on zero coupon bonds is paid at maturity, with no periodic payouts. The interest is the difference between the discounted purchase price and the face value of the bond.
Step-by-step explanation:
Interest on zero coupon bonds is not paid out periodically, as it is with other bonds that have coupon rates specifying the interest payment frequency. Instead, zero coupon bonds are sold at a discount to their face value and do not pay interest until the bond reaches maturity. Thus, investors receive the interest payment as a lump sum when the bond matures. This is effectively the difference between the purchase price and the face value. Therefore, the correct answer to when interest is paid on zero coupon bonds is d. At maturity.