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

question 77

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.
• E)Bond prices always increase over time.

---

Definitions:

Price Fixing

An illegal agreement among competitors to set, raise, or lower prices to predetermined levels, thereby undermining free market competition.

Deadweight Loss

A loss in economic efficiency that can occur when equilibrium for a good or service is not achieved or is not achievable.

Price Ceiling

A government-imposed limit on how high the price of a product can be, intended to protect consumers from high prices.

Monopolist

A single seller in a market who controls the supply of a product or service, and thus, has significant power to set prices.