John Peterson purchased a bond at a price far below its face value; it that makes no interest payments and will be redeemed at its face value at maturity. In all likelihood, he purchased a(n) __________ bond.
Based on the information provided, John Peterson likely purchased a zero-coupon bond.
A zero-coupon bond is a type of bond that does not make periodic interest payments, unlike regular bonds that typically pay interest to bondholders at regular intervals. Instead, zero-coupon bonds are initially sold at a discount to their face value and mature at their face value. The difference between the purchase price and the face value represents the interest or return on the bond.
To determine the type of bond John Peterson purchased, we can use the given characteristics of the bond: it was purchased at a price below its face value, makes no interest payments, and will be redeemed at face value at maturity. These features align with the characteristics of a zero-coupon bond, making it the most likely option.