Question

A zero coupon bond is a bond that pays no interest and is offered (and initially sells) at par. These bonds provide compensation to investors in the form of capital appreciation.

A. True
B. False

Answer 1

B. False

Step-by-step explanation:

Zero coupon bonds which are also referred to as deep discount bonds are offered to investors at deep discounted price and redeemed at par value. Such bonds do not pay any interest.

The return an investor earns on such bonds represents the difference between the purchase price and par value, since such bonds are redeemable at par.

Hence these bonds are issued at a discounted price and ain't sold at par.