19. Which of the following statement is TRUE regarding zeros? A) The interest ra

Question

19. Which of the following statement is TRUE regarding zeros? A) The interest rate on zeros is almost always close to zero B) Zeros are sold on a discounted basis C) The interest paid on zeros is subject to taxation D) A Junk bond is an example of a zero E) None of the above statements is true

20. If your non-bank corporation enters into an overnight reverse repurchase agreement your corporation is A) Borrowing fed funds temporarily B) Selling a security now while agreeing to buy it back tomorrow C) Giving an unsecured loan to the counterparty D) Procuring a banker's acceptance E) None of the above

Explanation / Answer

19. B) Zeros are sold on a discounted basis is TRUE
Zero means zero-coupon bond. A option is incorrect because The interest rate on zeros is almost always zero. B) Zeros are sold on a discounted basis is TRUE since zero-coupon bonds are always sold at a discount and matures at par. C is again incoe=rrect since there is no interest paid. Also, a junk bond is not a zero.

20. E) None of the above
Since no one of them must be true for the given condition to satisfy.

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