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Consider the following statements regarding the zero-coupon bond.
1. A zero-coupon bond is a debt security that not pay interest but instead trades at a deep discount, rendering a profit at maturity, when the bond is redeemed for its full face value.
2. These are special types of bonds issued only by the Central government specifically to a particular institution.
Which of the above statements is/are correct?
- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'A'. Can you explain this answer?
Most Upvoted Answer
Consider the following statements regarding the zero-coupon bond.1. A...
A zero-coupon bond is a debt security that does not pay interest but instead trades at a deep discount, rendering a profit at maturity, when the bond is redeemed for its full face value.
It does not make periodic interest payments or has so-called coupons, hence the term zero-coupon bond. When the bond reaches maturity, its investor receives its par (or face) value.
Zero-coupon bonds by private companies are normally issued at a discount.
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Consider the following statements regarding the zero-coupon bond.1. A...
Zero-coupon bond:
A zero-coupon bond is a type of debt security that does not pay any interest to the bondholder. Instead, it is sold at a deep discount from its face value and the bondholder receives the full face value of the bond at maturity. This means that the bondholder earns a profit by purchasing the bond at a discount and receiving the full face value at maturity.
Statement 1: A zero-coupon bond is a debt security that does not pay interest but instead trades at a deep discount, rendering a profit at maturity, when the bond is redeemed for its full face value.
This statement is correct. As mentioned earlier, a zero-coupon bond does not pay any interest to the bondholder. Instead, it is sold at a discounted price, typically below its face value, and the bondholder receives the full face value of the bond at maturity. The difference between the discounted purchase price and the face value represents the profit earned by the bondholder.
Statement 2: These are special types of bonds issued only by the Central government specifically to a particular institution.
This statement is incorrect. Zero-coupon bonds can be issued by various entities including governments, corporations, and financial institutions. While it is true that governments may issue zero-coupon bonds, they are not exclusively issued by the central government and are not specifically issued to a particular institution. These bonds can be bought by individual investors, financial institutions, or any other entity interested in investing in fixed-income securities.
Conclusion:
In conclusion, the correct statement is statement 1. Zero-coupon bonds do not pay interest but are sold at a discount and redeemed for their full face value at maturity, resulting in a profit for the bondholder. Statement 2 is incorrect as zero-coupon bonds can be issued by various entities and are not exclusively issued by the central government or specifically issued to a particular institution.
A zero-coupon bond is a type of debt security that does not pay any interest to the bondholder. Instead, it is sold at a deep discount from its face value and the bondholder receives the full face value of the bond at maturity. This means that the bondholder earns a profit by purchasing the bond at a discount and receiving the full face value at maturity.
Statement 1: A zero-coupon bond is a debt security that does not pay interest but instead trades at a deep discount, rendering a profit at maturity, when the bond is redeemed for its full face value.
This statement is correct. As mentioned earlier, a zero-coupon bond does not pay any interest to the bondholder. Instead, it is sold at a discounted price, typically below its face value, and the bondholder receives the full face value of the bond at maturity. The difference between the discounted purchase price and the face value represents the profit earned by the bondholder.
Statement 2: These are special types of bonds issued only by the Central government specifically to a particular institution.
This statement is incorrect. Zero-coupon bonds can be issued by various entities including governments, corporations, and financial institutions. While it is true that governments may issue zero-coupon bonds, they are not exclusively issued by the central government and are not specifically issued to a particular institution. These bonds can be bought by individual investors, financial institutions, or any other entity interested in investing in fixed-income securities.
Conclusion:
In conclusion, the correct statement is statement 1. Zero-coupon bonds do not pay interest but are sold at a discount and redeemed for their full face value at maturity, resulting in a profit for the bondholder. Statement 2 is incorrect as zero-coupon bonds can be issued by various entities and are not exclusively issued by the central government or specifically issued to a particular institution.
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Consider the following statements regarding the zero-coupon bond.1. A zero-coupon bond is a debt security that not pay interest but instead trades at a deep discount, rendering a profit at maturity, when the bond is redeemed for its full face value.2. These are special types of bonds issued only by the Central government specifically to a particular institution.Which of the above statements is/are correct?a) 1 onlyb) 2 onlyc) Both 1 and 2d) Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer?
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Consider the following statements regarding the zero-coupon bond.1. A zero-coupon bond is a debt security that not pay interest but instead trades at a deep discount, rendering a profit at maturity, when the bond is redeemed for its full face value.2. These are special types of bonds issued only by the Central government specifically to a particular institution.Which of the above statements is/are correct?a) 1 onlyb) 2 onlyc) Both 1 and 2d) Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? for UPSC 2025 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Consider the following statements regarding the zero-coupon bond.1. A zero-coupon bond is a debt security that not pay interest but instead trades at a deep discount, rendering a profit at maturity, when the bond is redeemed for its full face value.2. These are special types of bonds issued only by the Central government specifically to a particular institution.Which of the above statements is/are correct?a) 1 onlyb) 2 onlyc) Both 1 and 2d) Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for UPSC 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Consider the following statements regarding the zero-coupon bond.1. A zero-coupon bond is a debt security that not pay interest but instead trades at a deep discount, rendering a profit at maturity, when the bond is redeemed for its full face value.2. These are special types of bonds issued only by the Central government specifically to a particular institution.Which of the above statements is/are correct?a) 1 onlyb) 2 onlyc) Both 1 and 2d) Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer?.
Consider the following statements regarding the zero-coupon bond.1. A zero-coupon bond is a debt security that not pay interest but instead trades at a deep discount, rendering a profit at maturity, when the bond is redeemed for its full face value.2. These are special types of bonds issued only by the Central government specifically to a particular institution.Which of the above statements is/are correct?a) 1 onlyb) 2 onlyc) Both 1 and 2d) Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? for UPSC 2025 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Consider the following statements regarding the zero-coupon bond.1. A zero-coupon bond is a debt security that not pay interest but instead trades at a deep discount, rendering a profit at maturity, when the bond is redeemed for its full face value.2. These are special types of bonds issued only by the Central government specifically to a particular institution.Which of the above statements is/are correct?a) 1 onlyb) 2 onlyc) Both 1 and 2d) Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer? covers all topics & solutions for UPSC 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Consider the following statements regarding the zero-coupon bond.1. A zero-coupon bond is a debt security that not pay interest but instead trades at a deep discount, rendering a profit at maturity, when the bond is redeemed for its full face value.2. These are special types of bonds issued only by the Central government specifically to a particular institution.Which of the above statements is/are correct?a) 1 onlyb) 2 onlyc) Both 1 and 2d) Neither 1 nor 2Correct answer is option 'A'. Can you explain this answer?.
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