Which of the following describes a zero coupon bond?

A zero coupon bond is a debt security that does not pay periodic interest or coupon payments during its life. Instead, it is sold at a discount to its face value, meaning that the buyer pays less than what they will receive at maturity. The principal amount is indeed repaid at maturity, which is why option B accurately describes a zero coupon bond. The difference between the purchase price and the face value represents the interest earned by the investor, which is accumulated over the life of the bond and realized when the bond matures.

The other options do not apply to zero coupon bonds. For instance, a zero coupon bond does not offer periodic interest payments, nor does it make monthly repayments of either principal or interest. Instead, these bonds are structured to provide a single lump-sum payment at maturity, making option B the only correct description.