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    Zero-Coupon Bond and Bond Sinking Fund

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    1. Would a zero-coupon bond ever sell for its face amount? Discuss.

    2. What is the purpose of a bond sinking fund? Discuss.

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    https://brainmass.com/business/bond-valuation/zero-coupon-bond-bond-sinking-fund-106855

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    1 Would a zero-coupon bond ever sell for its face amount? Discuss.

    Zero coupon bonds are bonds that do not pay interest during the life of the bonds. Instead, investors buy zero coupon bonds at a deep discount from their face value, which is the amount a bond will be worth when it "matures" or comes due.
    Thus if a person (A) buys a 20 year zero coupon bond when it is issued at say $ 450 and holds it to maturity, he will get the face value (say $1000). Thus he has got his principal ($450) back plus he has earned an interest of $ 550 ($1000-$450).
    It is not necessary to hold a zero coupon bond to ...

    Solution Summary

    Answers questions on bond sinking fund, zero coupon bond.

    $2.19

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