The payment structure of a corporate bond is best thought of as:
an annuity of interest payments.
an annuity of principal and interest payments.
an annuity of principal payments.
an annuity of interest payments and a single principal payment at maturity
The correct answer is: an annuity of interest payments and a single principal payment at maturity
The payment structure of a corporate bond can be best thought of as an annuity of interest payments and a single principal payment at maturity. When you invest in a corporate bond, you are essentially lending money to the issuing company. In return, the company promises to pay you regular interest payments for the duration of the bond, which is usually fixed. These interest payments are similar to an annuity, which is a series of equal payments made at regular intervals.
Additionally, at the end of the bond's term, the issuing company repays the principal amount to the investor. This single principal payment represents the face value or par value of the bond. It is important to note that the principal payment is a lump sum payment, unlike the regular interest payments.
So, to summarize, the payment structure of a corporate bond is best described as an annuity of interest payments and a single principal payment at maturity.