Question

What is bond that pays no interest, but is sold at a discount to its face value?

Answer 1

A bond that pays no interest and is sold at a discount to its face value is called a zero-coupon bond.

The discount to the face value represents the interest that would have been earned on the bond if it had paid interest.

At maturity, the bondholder receives the face value of the bond, which represents the return on investment.

Answer 2

A bond that pays no interest but is sold at a discount to its face value is called a zero-coupon bond. The investor receives a return on the bond when it matures and is redeemed for its full face value. The difference between the purchase price and the face value represents the bond's return. Zero-coupon bonds are often used for long-term investments or to fund future financial obligations, such as retirement or college tuition.

Answer 3

A bond that pays no interest but is sold at a discount to its face value is commonly known as a zero-coupon bond. This type of bond does not make periodic interest payments like traditional bonds. Instead, investors purchase the bond at a price lower than its face value and receive the full face value when the bond matures. The difference between the purchase price and the face value represents the investor's return on the bond.