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17 September, 09:28

A zero coupon bond: is sold at a large premium. can only be issued by the U. S. Treasury. has a market price that is computed using semiannual compounding of interest. has less interest rate risk than a comparable coupon bond. has a price equal to the future value of the face amount given a positive rate of return.

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  1. 17 September, 09:37
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    A zero coupon bond:

    A. is sold at a large premium.

    B. has a price equal to the future value of the face amount given a positive rate of return.

    C. can only be issued by the U. S. Treasury.

    D. has less interest rate risk than a comparable coupon bond.

    E. has a market price that is computed using semiannual compounding of interest.

    Answer is : B

    Explanation:

    In classification of bonds we have a unique type of bond known as Zero-coupon bonds also know as Pure discount bonds, unlike traditional bonds they don't pay coupon instead they are sold on discount basis and on maturity the bondholder receive a par value, for this reason the price will be at a discount on sale and on maturity be redeemed at par price showing a positive rate of return.
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