A zero coupon bond's value increases over time at a compounded (or exponential)rate,not at a constant (or linear)rate.The corporate issuer reports the annual increase as interest expense,and the owner of the bond reports the increase as interest income and pays taxes on it each year.

Question

Quizplus · Accepted Answer

A zero coupon bond does not pay interest periodically, but its value increases at a compounded rate over time, which is reported as interest expense by the corporate issuer and interest income by the bond owner, subject to taxation.

A Zero Coupon Bond's Value Increases Over Time at a Compounded