Fixed-Income Types: Credit-Linked, PIK, and Deferred Coupon Bonds

Incorrect. There is no coupon at all in a zero-coupon bond; it is described as a simple balloon payment at maturity. Here, there is a coupon that begins in year 4.

A bond is issued with a 10-year tenor, selling at a discount to par. The coupon payments are a set nominal amount, to be paid semiannually starting in year 4. This kind of coupon payment structure indicates that the 10-year bond is _most likely_ a:

Incorrect. The coupon rate is fixed, but the coupon of a fixed-rate bond begins right away.

Correct! The fact that the bond's coupon payments begin in year 4 qualifies the bond as a deferred coupon bond.

zero-coupon bond.

deferred coupon bond.

fixed-rate coupon bond.