Series 52: Exercise

Exercise

Answer the following questions

1. 1. Which is likely to have lower interest payments over the life of the bond, term bonds or serial bonds?
2. 2. Which is more likely to have a sinking fund, term bonds or serial bonds?
3. 3. Which is more likely to reduce the issuer’s interest payments over time, an ascending or declining debt service structure?

Answers

1. 1. Serial bonds. As the principal is paid down over the life of the issue, there will be a corresponding decrease in interest payments.
2. 2. Term b