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"When does an investor receive payment of interest and principal on a Capital Appreciation Bond (CAB)?"

1 Answer

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Answer:

at maturity date

Step-by-step explanation:

Capital Appreciation Bonds are a type of municipal securities since they are backed by local governments. They work in a similarly to zero coupon bonds that accumulate compound interests until maturity date. The difference is that CAB are generally issued at face value, e.g. $1,000, and start accumulating interests. This $1,000 bond that yields 6% and has a maturity date of 10 years, will pay you $1,791 in 10 years.

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