A non-amortizing fixed income security is most accurately described as a Balloon bond or a Bullet bond?
Are they not the same thing? The correct answer is Bullet bond. Why is balloon bond wrong?
Balloon bond = amortizing bond, where principal amount is not fully amortized during the life time of the bond and there is a certain amount left at maturity, this amount which is then paid at maturity is the “balloon payment”.
Bullet bond = there is no amortization of the principal during the life time of the bond. The whole principal amount is paid back at maturity at one “bullet”.
Great! Thanks for the answer!