A credit market instrument that pays the owner the face value of the security at the maturity date and nothing prior to then is called aA) simple loan.B) fixed-payment loan.C) coupon bond.D) discount bond.
D) discount bond
D) Discount bond.
A discount bond is a credit market instrument that is issued at a price lower than its face value and pays the holder the full face value at the maturity date. It does not make any periodic interest payments to the holder. The holder earns a return by purchasing the bond at a discount, paying less than the bond’s face value, and receiving the full face value at maturity.
In contrast, a simple loan is a type of credit that provides the borrower with a lump sum of money that is paid back with interest over a fixed period of time. A fixed-payment loan is a type of loan that requires the borrower to make regular, fixed payments over the life of the loan. A coupon bond is a type of credit market instrument that pays the holder periodic interest payments, in addition to the face value payment at maturity.
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