A town issues $15 million in bonds to pay for construction of a new hi

QUESTION

A town issues $15 million in bonds to pay for construction of a new high school. The bonds will mature over 20 years, but the town will begin paying off a portion of the bonds annually after 15 years.

What type of bonds are being used to help finance the school construction?
A) callable bonds
B) revenue bonds
C) serial bonds
D) sinking-fund bonds
E) convertible bonds

ANSWER

Answer: C
Explanation: C) Serial bonds are bonds that mature at different dates. They help issuers avoid cash flow problems and are popular with state and municipal governments.