Subordinated debt is typically associated with which payment structure?

Subordinated debt is often characterized by a payment structure that allows for flexibility in cash flow management, which is primarily why the choice of only interest payments enabling principal repayment as cash flow permits is correct. This structure typically supports borrowers who may not have consistent cash flow, allowing them to manage their financial obligations better during periods of lower revenue.

In contrast to amortized payments, where borrowers pay both principal and interest throughout the loan's life, subordinated debt often has interest-only payments to ease cash flow pressures. The principal can be repaid when the borrower's financial situation improves, which reflects the higher risk that lenders take when providing subordinated debt; they stand behind senior debt in terms of claim priority.

The option regarding full payment at the end of the term does not reflect the typical arrangement for subordinated debt, as it is more common in certain structured finance products rather than subordinated notes or loans. The "no payment requirement until sale of the asset" option further implies a conditional structure not standard for subordinated debt, which generally still requires some form of interest payment during the borrowing period. Hence, the choice that specifies only interest payments while allowing for principal repayment as cash flow permits aligns well with the characteristics of subordinated debt.