Financial Awareness - Risk, Stability & Emerging Finance
Which of the following long-term instruments in the corporate debt market is issued at a discount and redeemed at face value, without paying periodic interest?
Which of the following long-term instruments in the corporate debt market is issued at a discount and redeemed at face value, without paying periodic interest?
medium Q7 of 15
Step-by-Step Solution
Step 1: Identify the key qualifiers
The question specifies a long-term corporate debt instrument that is issued at a discount, redeemed at face value, and pays no periodic interest.Step 2: Apply concept knowledge
Zero-Coupon Bonds are long-term corporate debt instruments that do not pay periodic interest and are issued at a discount, with returns realized at maturity.Step 3: Eliminate other options
Commercial Paper is short-term; Non-Convertible and Convertible Debentures usually pay periodic interest.Final Answer:
Zero-Coupon Bonds → Option AQuick Check:
Zero-Coupon Bond = long-term, no interest, discount issue ✅
Quick Trick: Zero-coupon = no coupon, profit only at maturity
Common Mistakes:
- Confusing Commercial Paper with Zero-Coupon Bonds despite different maturity periods
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