A bond that has only one payment, which occurs at maturity, defines which one of these types of bonds?

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BlackTom AI · Accepted Answer

The question asks us to identify the bond type that has a single payment, occurring only at maturity.
Option 1 (Junk): This term refers to a bond with a high yield due to low credit quality, not to the payment structure. It describes risk and rating, not the payment timing, so it does not answer the question.
Option 2 (Floating-rate): A floating-rate bond pays coupons that vary with a reference rate, typically semiannually or annually, so it involves multiple coupon payments rather than a single payment at maturity.
Option 3 (Zero coupon): This is the class that matches the description. Zero-coupon bonds do not pay periodic coupons; instead, they are issued at a discount and provide a single payment equal to the face value at maturity. This single payment structure is the defining feature.
Option 4 (Callable): A callable bond can be redeemed by the issuer before its stated maturity, which concerns call features and timing flexibility, not the existence of just one payment at maturity.
Option 5 (Debenture): A debenture is a type of unsecured debt instrument; it refers to credit protection rather than timing of payments. It describes risk/security attributes, not the payment schedule.
In summary, the distinguishing feature in this scenario is the absence of periodic coupon payments and the single payment at maturity, which aligns precisely with a zero coupon bond.

BUSFIN 3220 AU2025 (2110) Exam 2 - Requires Respondus LockDown Browser

A bond that has only one payment, which occurs at maturity, defines which one of these types of bonds?

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