What the questions look like
Every question in the free SIE bank carries a full worked solution. Here is one from the pool:
Choice D is correct because zero-coupon bonds are issued at a significant discount from their face (par) value and make no periodic coupon (interest) payments. The investor's return comes entirely from the difference between the discounted purchase price and the full face value received at maturity. The imputed interest is taxed annually (phantom income) even though no cash is received until maturity.