A consol is a bond that: a. Pays a fixed annual coupon amount, and when originally issued, is set to mature in 30 years. b. Pays a fixed annual coupon amount, and when originally issued, is set to mature in 50 years. c. Does not pay an annual co

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27-07-2021
Business

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A consol is a bond that: a. Pays a fixed annual coupon amount, and when originally issued, is set to mature in 30 years. b. Pays a fixed annual coupon amount, and when originally issued, is set to mature in 50 years. c. Does not pay an annual co

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anthougo anthougo · Answer 1 · 2021-07-29T03:34:23+02:00

Complete Question:

A consol is a bond that:

a. Pays a fixed annual coupon amount, and when originally issued, is set to mature in 30 years.

b. Pays a fixed annual coupon amount, and when originally issued, is set to mature in 50 years.

c. Does not pay an annual coupon (i.e., the annual coupon payment is $0) but when it matures pays out the par value of the bond.

d. Does not pay an annual coupon (i.e., the annual coupon payment is $0) and never matures.

e. Pays a fixed annual coupon amount forever.

Answer:

A consol is a bond that:

e. Pays a fixed annual coupon amount forever.

Explanation:

This debt instrument issued by the government does not have any scheduled date for the return of principal, but it pays perpetual interest payments without any maturity date. It is a perpetual annuity. The government determines when to repay the principal if it so chooses. This implies that the holders continue to receive annual interests.