Question

A zero coupon bond (a form of a discount bond) is a debt security with just one payment..

True or False

Answer 1

TRUE
Generally zero coupon bond are sold on deep discount.
Zero coupon bond does not pay any interest until the maturity.
At the time of issue,it will be issued on much less price than its
face value / maturity value. So the difference between issue
price and maturity price is the earning of the bondholder.
- Not carry any interest
- Issue on deep discount
- Once issue then amount paid on maturity only, so no interest pay-out in lock period.
So, it is true to say that zero coupon bond is a debt security with just one payment.