Q1 Which of the following is not true regarding zero-coupon bonds?

a. They are issued at a general discount from par value.

b. Zero-coupon bonds are purchased mainly for saving purposes investment account, such as pension funds and individual retirement accounts.

c. The issuing firm is not permitted to deduct the amortized discount as interest expense for federal income tax purposes, even though it does not pay interest.

d. Investors are taxed annually on the amount of interest earned, even though the interest will not be received until maturity.

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Q3 When the foreign interest rate rises, the return on foreign assets rises, so the relative expected return on dollar assets falls. The quantity demanded of dollar assets then fall, the demand curve shifts to the left, and the exchange rate declines

a. FALSE

b. TRUE