Question

For a zero-coupon bond:

	A.	The coupon rate is lower than the market rate
	B.	The cash received from investors is less than the bond's face value
	C.	Amortization of bond discount equals to the interest expense
	D.	The bond's net book value rises over time
	E.	All of the above

Answer 1

Answer: Option E.) All of the above

Explanation:

A zero-coupon bond is a bond in which does not make periodic interest payments. when the bond reaches maturity the investor receives the face value of the bond. A zero-coupon bond that is issued at a deep discount to its face value there is no interest payments occured.

A zero-coupon bond have the following features:

• The coupon rate is lower than the market rate
• The cash received from investors is less than the bond's face value
• Amortization of bond discount equals to the interest expense
• The bond's net book value rises over time

Therefore, all the given statements are correct about zero-coupon bond.

Thus the Option E) is correct.