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

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.

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.

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