How Are Investors in Zero-Coupon Bonds Compensated for Making Such

question 57

Multiple Choice

How are investors in zero-coupon bonds compensated for making such an investment?

• A)Such bonds are purchased at their face value and sold at a premium at a later date.
• B)The bond makes regular interest payments.
• C)Such bonds are purchased at a discount to their face value.
• D)The face value of these bonds is less than the value of the bond when the bond matures.

---

Definitions:

Aging of Accounts Receivable

A method used to estimate the collectability of accounts receivable by categorizing them according to the length of time an invoice has been outstanding.

Credit Sales

Credit Sales are transactions in which goods or services are provided to customers with the understanding that payment will be made at a later date.

Credit Cards

Financial instruments issued by banks or financial institutions allowing cardholders to borrow funds at the point of sale, subject to repayment terms and interest rates.

Nonsufficient Funds Checks

Checks that cannot be processed due to the drawer’s account lacking sufficient funds, leading to a bank refusal to honor the check.