Does anyone know what are serial bonds or income bonds? On November 15, 2006, Grinell Construction Company decided to issue bonds to help finance the acquisition of new construction equipment. They issued bonds totaling $10,000,000 with a 6% coupon rate due June 15, 2026. Grinell has agreed to pay the entire amount borrowed in one lump sum payment at the maturity date. Grinell is not required to make any principal payments prior to maturity. What type of bond structure has Grinell issued? A) Serial bonds. B) Bullet maturity. C) Income bonds. Your answer: B was correct!
I saw that same one in the qbank yesterday. The difference between the answer choices is that a bullet bond is the only type of security that pays a coupon and pays principal at maturity. From Investopedia.com Income Bond - A type of debt security in which only the face value of the bond is promised to be paid to the investor, with any coupon payments being paid only if the issuing company has enough earnings to pay for the coupon payment. Serial Bonds- A bond issue in which a portion of the outstanding bonds matures at regular intervals until eventually all of the bonds have matured. As they mature gradually over a period of years, these bonds are used to finance a project providing regular, level or predictable income streams. Serial bonds are also used to finance projects with regular, level debt payments such as residential developments.