What type of payment includes both interest and principal?

Blended payments refer to a type of loan or investment repayment structure that combines both interest and principal into a single payment amount. This format allows borrowers to pay off their debt gradually, with each payment contributing towards both the interest charged for borrowing and the repayment of the original loan amount (principal). This approach contrasts with other payment structures where either only interest or a different type of payment is involved.

In the context of investment options listed in the other choices, target-date funds do not inherently focus on a blended payment structure; instead, they are investment vehicles that automatically adjust asset allocations based on a specified target date, such as retirement. Short-term bond funds primarily invest in bonds with short maturities and typically pay interest rather than a combination of both interest and principal. Portfolio allocation services focus on strategically distributing investments across different asset classes without necessarily implying a blended payment mechanism.

Thus, blended payments are the only option that accurately encompasses the dual nature of interest and principal in a structured payment plan.