What are serial ties?
Financial bonds are often used to attract investors to projects where money is needed. Investors lend a specified amount in return for the promise that they will earn a higher amount in the future. Some financial bonds have one maturity date. This applies to the date where the initial loan of the investor and its profit will be repaid. However, serial bonds are distinguished by the fact that they have numerous maturity data.
When a person buys serial bonds, it will not be repaid in a flat rate. It receives several fractions of the amount that is caused by it in different data. Data maturity of serial bonds can appear at regular intervals. If the first date of maturity is five years from the date on which the bond was obtained, it is likely that the second will be ten years from the date of purchase. Although it is a common practice, it is not absolute. However, they are commonly used to support municipal projects in cities. These bonds are often issued for projects to be completed in phases.
For example, take the soil development project. One phase of the project can be completed and may start sales or leasing. A few years later, another part can be completed and then sales and leasing in this area can begin. The repayment of the issued serial bonds can be scheduled to coordinate with the completion of each part of the project, as the generated funds that are generated may be sufficient to repay parts of the debt.
may be useful to think of serial ties, because many small bonds within a large custody. The periodic repayment of serial bonds is controlled by coupons. When each coupon reaches the data of its maturity, it can be applied to a part of the outstanding amount.
Serial bonds can be beneficial for the issuer compared to other options. When the interest is attached to the debt, the debtor generally pays more interest on larger amounts. Thus, if the issuer of serial bonds decided to wait and repay the full amount of outstandingSuddenly, it would probably be more expensive. Making regular payments the issuer reduces the outstanding amount for which the interest must be paid.
For example, consider that urban water thesis is repaying $ 500,000 this year (USD) of a $ 2 million bond. After this payment, the interest is only due to $ 1.5 million. Next year, after another $ 500,000, the interest will only apply to $ 1 million. This should be reflected in significant savings for society.