medium · Corporate Credit Analysis
How does the 'effective life' of a $500 million TLA with 20% annual amortization compare to a $500 million TLB with 1% annual amortization, assuming both have a 5-year maturity?
- Both have identical effective lives as they share the same 5-year maturity date.
- The TLB has a shorter effective life due to institutional callability features.
- The TLA has a shorter effective life because principal is repaid progressively over the term.
- The TLA has a longer effective life due to the complexity of banking relationships.
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