Which of the following statements is most true about zero coupon bonds?
A) They typically sell at a premium over par when they are first issued.
B) They typically sell for a higher price than similar coupon bonds.
C) They are always convertible to common stock.
D) They typically sell at a deep discount below par when they are first issued.

Question

Quizplus · Accepted Answer

Zero coupon bonds do not pay interest but are sold at a discount below their face value, so they are typically issued at a deep discount below par. This allows investors to purchase the bond at a lower price and receive the face value of the bond at maturity, resulting in a capital gain.

Which of the Following Statements Is Most True About Zero