How do term bonds differ from serial bonds?

Term bonds and serial bonds serve distinct purposes in the realm of municipal finance, and understanding their characteristics is crucial.

Term bonds are structured so that all the principal amount is due on a specific maturity date. This means that investors receive their entire investment back at one time, which can create a predictable cash flow for both the issuer and the investor. The term bond structure is beneficial for projects that are expected to require the full amount of funding at a future date.

In contrast, serial bonds are issued with various maturities, allowing for portions of the principal to be repaid at different times. This staggered repayment schedule can help manage cash flow needs and can appeal to investors looking for periodic income streams.

The correct option highlights that all term bonds mature on the same date, emphasizing a key feature that distinguishes them from serial bonds. This characteristic simplifies the management of liabilities for the issuer and provides a clear outline for investors regarding when they will receive their principal investment back.

Understanding this difference allows stakeholders in government financing to choose the bond structure that best suits their financial strategy and objectives.