Which of the Following Is Not a Characteristic of a Zero-Coupon

question 21

Multiple Choice

Which of the following is not a characteristic of a zero-coupon bond?

• A)It doesn't pay interest.
• B)It is sold at a deep discount from face value.
• C)The annual increase in the bond's price is not taxable as ordinary income.
• D)It provides a means for corporations to take annual deductions without current cash outflow.

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Definitions:

Acceptable Price

The price level at which a buyer views the cost of a product or service as reasonable, taking quality and utility into account.

Willing To Pay

Willing to pay is the maximum amount that a consumer is prepared to spend on a good or service.

Consumer Surplus

The difference between the total amount that consumers are willing and able to pay for a good or service versus the total amount they actually pay.

Producer Surplus

The difference between what producers are willing to accept for a product versus what they actually receive in the market.