ShmoopTube
Where Monty Python meets your 10th grade teacher.
Search Thousands of Shmoop Videos
Finance: What are serial bonds, term bonds, and staggered maturities? 5 Views
Share It!
Description:
What are serial bonds, term bonds, and staggered maturities? Serial bonds are most often municipal bonds that are issued for projects that will generate large revenues once completed. As a result, the maturities are sequenced serially in progressive years with commensurate yields. Term bonds are multiple issues that each have a fixed maturity from the date of issuance. Staggered maturities refers to a portfolio designed to have a portion of the fixed income allocation maturing each year for income or reinvestment at the owner’s discretion.
- Social Studies / Finance
- Finance / Financial Responsibility
- College and Career / Personal Finance
- Life Skills / Personal Finance
- Finance / Finance Definitions
- Life Skills / Finance Definitions
- Finance / Personal Finance
- Courses / Finance Concepts
- Subjects / Finance and Economics
- Finance and Economics / Terms and Concepts
Transcript
- 00:00
Finance Allah Shmoop What are serial bonds term bonds and
- 00:05
staggered maturity Sze of bonds Well let's start with the
- 00:10
serial bonds No not not that serial bonds Come do
- 00:14
it Purposely measured durations like we dig you Tractor company
- 00:18
needs to buy a new factory that'll cost one hundred
Full Transcript
- 00:20
million bucks They know that they're operating Profits will pay
- 00:23
Hey back that hundred meal over time So they sell
- 00:25
one hundred million dollars worth of cereal bonds to the
- 00:28
public that come do serially in two years four years
- 00:31
six years and eight years and then are fully retired
- 00:34
a decade later where every two years ah lottery wheel
- 00:37
spins and a traunch of those serial bonds is called
- 00:40
they have effectively staggered the maturity of their bonds in
- 00:44
having these serial bonds come due on different dates you
- 00:47
know spread nicely apart like years apart Technically they could
- 00:51
have also just offered five different series of bonds at
- 00:54
twenty million bucks each which come do it different durations
- 00:57
that would be directly staggering The maturity Sze of them
- 01:01
Well why would you want to stagger The maturity is
- 01:03
of bonds anyway because companies do much better refinancing or
- 01:07
raising money in small amounts all the time over long
- 01:11
periods of time rather than say having all fourteen billion
- 01:14
dollars of some huge principal debt come do all that
- 01:17
same week Should something go awry in the company be
- 01:21
unable to either refinance that principle or pay it all
- 01:24
back Well then they end up here structurally Financial managers
- 01:28
of companies embrace term bonds I'ii bonds that run for
- 01:31
a certain term or time period and then they're callable
- 01:34
or they mature or they convert into stock at a
- 01:36
given price per share But simply while those bonds then
- 01:40
don't at least come do all the same day and
- 01:42
put the company at risk for the goal here is
- 01:44
to stagger the maturity of bonds so that companies never
- 01:47
feel illiquid or like they have a gun to their
- 01:49
head to suddenly come up with a ton of cash
- 01:51
to a snarling group of Wall Street bond investors who
- 01:55
spell forgive this way
Up Next
GED Social Studies 1.1 Civics and Government
Related Videos
What is bankruptcy? Deadbeats who can't pay their bills declare bankruptcy. Either they borrowed too much money, or the business fell apart. They t...
What's a dividend? At will, the board of directors can pay a dividend on common stock. Usually, that payout is some percentage less than 100 of ear...
How are risk and reward related? Take more risk, expect more reward. A lottery ticket might be worth a billion dollars, but if the odds are one in...