If an investor purchases a zero-coupon municipal bond callable in five years at 102, what amount will the investor receive if the bond is called?

When a zero-coupon municipal bond is callable, the amount an investor will receive upon calling is generally determined by the call price specified in the bond's terms. In this scenario, the investor purchased the bond at a price of 102, which indicates the bond's call price is also established at a premium to the par value.

Therefore, if the bond is called, the investor will receive 102% of the original par value, consistent with the call feature of the bond. The bond does not make periodic interest payments, so the investor’s return is based on the original par value that has been paid at a premium. The reference to the "compound accreted value," though it might confuse, is related to how zero-coupon bonds grow in value over time due to the accumulation of interest that is not paid out until maturity or a call event.

Thus, when the bond is called, what the investor ultimately receives is in alignment with the call premium set at 102. This makes option B the correct choice, as it clearly delineates that the investor will receive 102% of the compound accreted value, reflecting the bond’s callable terms.