Issues that provide funds to retire another issue early are known as
A) Bearer bonds
B) Secured debentures
C) Unsecured debentures
D) Revenue bonds
E) Refunding bonds

Question

Quizplus · Accepted Answer

Refunding bonds are used to retire an outstanding bond issue before its maturity date. This is done to take advantage of lower interest rates or to consolidate several outstanding issues. Refunding bonds are issued with the proceeds being used to purchase government bonds, which will mature at the time the outstanding bonds are due. The income from the government bonds is then used to pay the interest and principal payments on the outstanding bonds. By doing this, the issuer can lower its debt service costs and use the savings to fund other projects.

Issues That Provide Funds to Retire Another Issue Early Are