A ______________ bond issue has a single, fairly lengthy maturity date for all of the bonds being issued and is the most common type of bond issue.
Question
A ______________ bond issue has a single, fairly lengthy maturity date for all of the bonds being issued and is the most common type of bond issue.
Solution
A term bond issue has a single, fairly lengthy maturity date for all of the bonds being issued and is the most common type of bond issue. In a term bond structure, all of the bonds mature at the same time, which means that the issuer is required to repay the entire principal amount at the maturity date. This contrasts with serial bonds, which mature in a series of installments over a period of time.
Term bonds typically have longer maturities, often ranging from 10 to 30 years. Investors may prefer term bonds for their predictability and stability, receiving fixed interest payments during the life of the bond and receiving their principal back at maturity. However, investors must also consider factors such as interest rate risk, as the value of term bonds can fluctuate significantly with changes in the market interest rates.
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