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Jan Seva Trust, a registered public charitable trust that is a non-profit organisation (NPO), wants to raise money from the public by issuing Zero Coupon Zero Principal (ZCZP) instruments on the Social Stock Exchange. What is the key feature of such an instrument as it applies to Jan Seva Trust's investors?

A Zero Coupon Zero Principal instrument pays neither interest nor principal back to investors. It is issued by a non-profit organisation to raise funds for a social cause, so the investor's contribution is in the nature of a donation rather than an investment with returns.

  1. AInvestors receive a fixed coupon every year and the principal at maturity
  2. BInvestors receive neither interest nor principal, and the instrument is issued to support the social causeCorrect
  3. CInvestors receive equity shares carrying voting rights in the trust
  4. DInvestors receive a share of the trust's surplus as dividend

Explanation

A ZCZP instrument is issued by an NPO and carries no coupon and no principal repayment. Investors contribute for the social cause and receive no financial return. Options with coupon, equity or dividend describe commercial instruments that an NPO cannot offer in this form.

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