Finance · Debt Instruments
'InfraBuild Corp.,' a major construction company, raises 5,000 crore rupees by issuing 10-year Corporate Bonds to finance a new highway project. The bond covenants specify that the company will make semi-annual interest payments at a fixed coupon rate of 8 percent throughout the 10-year term. Crucially, the entire principal amount of 5,000 crore rupees is due to be repaid to the bondholders in a single lump sum at the end of the 10th year on the maturity date. To mitigate the risk of default on the maturity date, InfraBuild Corp. has established a Sinking Fund where it makes periodic deposits. Which specific repayment structure has InfraBuild Corp. adopted for this bond issuance?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Revolving Credit Payment, because the company can draw and repay the principal multiple times over the 10-year period.
- 2Bullet Payment, because the entire principal amount (face value) of the debt is paid at once on the specified maturity date, with only periodic interest payments being made during the tenor.✓
- 3Floating Rate Note (FRN) Payment, because the interest rate is adjusted every six months based on a benchmark index.
- 4Amortizing Loan Payment, because the company pays down the loan principal gradually over the 10 years.
Correct answer
Bullet Payment, because the entire principal amount (face value) of the debt is paid at once on the specified maturity date, with only periodic interest payments being made during the tenor.
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