A bond that returns principal and interest on a regular basis. It pays a coupon and makes partial repayment of principal to bondholders in installments over a specific period of time. Since principal is repaid over time, the bond’s maturity does not demonstrates the effective maturity of the principal outstanding. The principal amortization means the face value of the bond remains unchanged, but a percentage is applied to the bond price and interest payments in order to account for the decrease in cash the issuer would have to pay.
January 9, 2025
