SIE Exam Question 865: Answer and Explanation

Question: 865

Which of the following accounts is most suitable to hold a zero-coupon bond?

  • A. IRA
  • B. Joint taxable account
  • C. Payable on death account
  • D. Totten trust

Correct Answer: A

Explanation:

Of the choices provided, an IRA is the most suitable account to hold a zero-coupon bond because the interest would be tax-deferred. If a zero-coupon bond were held in a taxable account, then tax would be due on the interest earned each year, even though no interest was paid to the bondholder.

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