Which of the following is a key characteristic of a zero-coupon bond?

Question: Which of the following is a key characteristic of a zero-coupon bond?

Answer options:

• It pays interest semi-annually and repays principal at maturity. ✅ It is issued at a discount and matures at its face value, with no periodic interest payments.
• Its interest payments are tax-exempt in Canada.
• It is always callable by the issuer.

Correct answer: It is issued at a discount and matures at its face value, with no periodic interest payments.

Explanation: Zero-coupon bonds are debt instruments that do not pay interest periodically but are sold at a discount to their face value and mature at par, with the investor's return being the difference.