Bonds That Require Payment of the Full Principle Amount of the Bond at the End of the Loan Term Are Referred to as ___
Term Bonds require payment of the full principal amount at the end of the loan term, distinguishing them from serial and convertible bonds.
by Sai V
Updated Oct 30, 2023
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Bonds That Require Payment of the Full Principle Amount of the Bond at the End of the Loan Term Are Referred to as
A) Multiple Choice Question.
B) Term Bonds
C) Serial Bonds
D) Convertible Bonds
The correct answer to the question is B) Term Bonds.
Term bonds are bonds that necessitate the payment of the entire principal amount at the conclusion of the loan period. Unlike serial bonds, which have staggered maturity dates, and convertible bonds, which can be converted into equity, term bonds require the full repayment of the principal at the bond's maturity. This characteristic distinguishes them as a specific type of bond, making option B the correct choice.
What is a Bond?
A bond is a loan agreement between an investor and a borrower, usually a company or government. It outlines payment terms and interest rates, which can be fixed or variable. Bond prices move opposite to interest rates, and they mature on a specified date, requiring full repayment or risking default.
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