Answer (C) is correct . AAA and AA are Standard & Poor’s highest ratings. They signify the highest quality. Bonds rated A and BBB are investment grade. Bonds rated below BBB are speculative high-yield or low-grade bonds (junk bonds).
Answer (A) is incorrect because A zero-coupon bond pays no interest and is sold at a discount.
Answer (B) is incorrect because An investment grade bond is rated A or BBB.
Answer (D) is incorrect because An income bond pays interest only if the issuer earns income sufficient to pay the interest.
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