Which one of the following terms applies to a bond that initially sells at a deep discount and only makes one payment to bondholders?
a. Callable
b. Income
c. Zero coupon
d. Convertible
e. Tax-free

Hi, in order to find the price of a given instrument, you need to bring to present value all its future cash flows, and as you might know, the further the bond payment is from today, the less its price is, and since the only payment takes place when the bond matures, this bond is sold at a very deep discount.

And just one payment is made, when the bond matures, therefore, c) is the answer.

Best of luck.

Which one of the following terms applies to a bond that initially sells at a deep discount and only makes one payment to bondholders? a. Callable b. Income c. Zero coupon d. Convertible e. Tax-free

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Which one of the following terms applies to a bond that initially sells at a deep discount and only makes one payment to bondholders?
a. Callable
b. Income
c. Zero coupon
d. Convertible
e. Tax-free