Quiz of the Day
A zero coupon bond is:
- An investment where you interest is mailed to you automatically on a regular basis, i.e. there is no coupon to clip.
- Are sold at a substantial discount to their face value. The difference between what you pay, and what you receive at maturity, is your interest.
- Actually a form of stock.
- Debt only offered by the U.S. Treasury
- Debt only offered by corporations.
Answer: B. While most bonds pay interest on a regular—usually semi-annual basis—zero coupons don’t provide a steady stream of income. You receive all of your interest when the bond matures.
