An Advantage of the Zero Coupon Bond Is That There

question 130

True/False

An advantage of the zero coupon bond is that there is no coupon, so the yield to maturity is locked in for the life of the bond.

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Definitions:

Internal Rate of Return

The interest rate at which the net present value of all the cash flows (both positive and negative) from a project or investment equals zero.

Net Present Value

A financial metric used to evaluate the profitability of an investment, calculated by subtracting the present value of cash outflows from the present value of cash inflows over a period of time.

Discount Rate

The interest rate used to discount future cash flows to their present value, often reflecting the risk or cost of capital.

Payback Period

The amount of time it takes for an investment to generate an amount of income or cash equivalent to the cost of the investment.