One of the Disadvantages to a Firm in Issuing Zero

question 61

True/False

One of the disadvantages to a firm in issuing zero coupon bonds is that the tax shield associated with the bonds' appreciation cannot be claimed until the bond matures.

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Definitions:

Annual Coupons

The interest payments made to bondholders annually over the life of the bond.

Capital Structure

The composition of a company's liabilities and equity, outlining how a business finances its overall operations and growth.

Component Costs

The various expenses that make up the total cost of financing for a company, including the cost of debt and equity.

Market Values

The current price at which an asset or service can be bought or sold, determined by supply and demand.