Which type of bond is characterized by not making periodic interest payments?

A zero-coupon bond is characterized by not making periodic interest payments. Instead of offering regular interest payments, zero-coupon bonds are issued at a discount to their face value and mature at par value. The return for the investor comes from the difference between the purchase price and the face value paid at maturity. This structure makes zero-coupon bonds particularly appealing to some investors, as they provide a clear path to yield and can facilitate long-term investment strategies without the cash flow of periodic interest payments.

The other options represent bonds that do involve periodic interest payments: convertible bonds allow investors to convert their bonds into stock, municipal bonds typically provide tax-exempt interest income, and high-yield bonds, also known as junk bonds, offer higher interest rates to compensate for higher risk. Therefore, zero-coupon bonds stand out by having no interest payments, making them unique in the bond market.