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Exam Name: CMT Level I Exam
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Section B (2 Mark)
Which of the following statements is TRUE concerning zero coupon bonds?
A. Zero-coupon bonds generally require the investor to switch to a coupon-bearing bond after a period of 5 years.
B. The investor must pay taxes on the annual accrued interest even though no interest is actually received unless the bonds are held in tax-sheltered accounts
C. Investors cannot lock in a high rate of return because of the lack of an annual coupon.
D. Large capital losses accrue when interest rates decline.
Answer: B

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