What type of bond is sold at a price lower than its face value, with all interest paid at maturity?

A zero coupon bond is sold at a price lower than its face value, meaning it is issued at a discount. This type of bond does not pay periodic interest payments like traditional bonds do; instead, it pays all of the interest—referred to as the "imputed interest"—along with the principal amount when it matures. The difference between the purchase price and the face value at maturity represents the interest earned by the investor.

This characteristic of a zero coupon bond makes it distinct from other types of bonds. For instance, bearer bonds and callable bonds involve different mechanisms of payment and rights, while secured bonds rely on collateral and may pay interest throughout the duration of the bond. Understanding the structure of zero coupon bonds is crucial because it directly impacts investment strategy, particularly when considering factors like taxation and the time value of money.