True or False: With a discount bond, the return on a bond is equal to the rate of capital gain.
A. False: Bond returns can never equal the rate of capital gain; there must be a capital loss or gain indicated.
B. True: A discount bond pays fixed interest payments every year so the return is equal to the rate of capital gain.
C. True: A discount bond has no coupon payments so the return on the bond is equal to the rate of capital gain.
D. There is no way to determine this without the knowing the coupon amount and interest rate.
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