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kitkat867 kitkat867
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2 years ago
Which one of the following statements correctly describes the major drawback of a zero-coupon bond?

▸ Unless the bond is held in a tax-sheltered account, the investor must pay taxes on the annual accrued interest even though no interest is actually received.

▸ The conversion feature found on most zero-coupon bonds generally requires the investor to switch to a coupon-bearing bond after a period of 5 years.

▸ The lack of an annual coupon basically prohibits the investor from locking in a high rate of return.

▸ Because there is no reinvestment of a coupon payment, large capital losses accrue when interest rates decline.
Textbook 
Fundamentals of Investing

Fundamentals of Investing


Edition: 14th
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hamusa4hamusa4
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2 years ago
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kitkat867 Author
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2 years ago
Thanks for your help!!
Harvinder
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Yesterday
Thanks
alpheratz
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2 hours ago
Thank you, thank you, thank you!
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