SIE (Securities Industry Essentials) Practice Exam

Which of the following is considered zero-coupon securities?

1. Corporate Bonds

2. Municipal Bonds

3. Treasury bills

4. Preferred Stocks

The correct answer is: Treasury bills

Zero-coupon securities are financial instruments that do not make periodic interest payments. Treasury bills, also known as T-bills, are short-term debt securities issued by the U.S. government that are considered zero-coupon securities. This means that when you purchase a T-bill, you are essentially loaning money to the government and will receive the full face value of the bond when it matures, but you will not receive any interest payments throughout the life of the bond. Options A, B, and D are all incorrect as they are types of bonds or stocks that do make periodic interest or dividend payments. Corporate bonds are issued by companies and pay out periodic interest payments, municipal bonds are issued by state or local governments and pay out periodic interest payments, and preferred stocks pay out regular dividend payments. Therefore, these options do not fall under the category of zero-coupon securities.