Final answer:
The liability for Bond Anticipation Notes (BANs) refers to the responsibility of the issuer to make the promised payments to the bondholders. If a bond issuer fails to make the payments, bondholders can take legal action but may only recoup a portion of their investment.
Step-by-step explanation:
The liability for Bond Anticipation Notes (BANs) refers to the responsibility of the issuer to make the promised payments to the bondholders. BANs are short-term debt instruments used by municipalities to bridge the gap between issuing long-term bonds and receiving the funds needed for a specific project. They are typically backed by the anticipated proceeds from the long-term bonds.
If a bond issuer fails to make the payments on BANs, the bondholders can take legal action to require the issuer to fulfill its obligation. However, there is a risk that the issuer may not have sufficient assets to repay the full amount owed. In such cases, the bondholders may only recoup a portion of their initial investment.