Basic Technical Investment Banking Practice Test

Which debt type is usually amortized?

Bank debt High-yield debt Both Neither

Correct Answer:

Bank debt

Explanation:

Amortization means paying down the loan principal gradually over time rather than all at once at the end. Bank debt, such as term loans, is typically structured with scheduled principal repayments over the life of the loan, so it is usually amortized. High-yield debt, in contrast, is generally issued as a bond with interest payments and a single principal repayment at maturity, so it is not amortized. While there are exceptions in certain facilities, the standard practice is that bank debt is the one usually amortized.

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