Zero Coupon Bonds
Q: The largest component of returns for a 7 year zero coupon bond yielding 8% and held to maturity is:
A. Capital Gains
B. Interest Income
C. Reinvestment Income
I said A, as ZCBs are generally purchased at deep discount to par value. However the answer was B. I know that C is incorrect.
The answer was B. Can anyone explain why?
Study together. Pass together.
Join the world's largest online community of CFA, CAIA and FRM candidates.