Final Answer:
The bond structured so that the issuer pays off a portion of the principal before the final maturity but pays off a major portion at the final maturity date is a balloon bond (B).
Step-by-step explanation:
A balloon bond is a type of debt instrument where the issuer repays a fraction of the principal amount periodically, usually smaller installments over the bond's life, with a larger portion, the "balloon payment," due at the bond's maturity. This structure helps in reducing the issuer's repayment burden during the life of the bond, allowing for gradual payments before a substantial final payment.
It offers flexibility in managing cash flows for the issuer, as they can plan for smaller regular payments and then handle the larger, final payment at maturity. Investors often find balloon bonds appealing due to the lower periodic payments, but they also face higher risk as the larger final payment necessitates effective financial planning by the issuer to meet that obligation.
Correct Answer: Option B (a balloon bond)