Bond Maturities

When a bond matures, the principal payment and the last semi-annual interest payment are due. Corporations will select to issue bonds with the maturity type that best fits their needs, based on the interest rate environment and marketability.

Term Maturity

A term bond is the most common type of corporate bond issue. With a term bond, the entire principal amount becomes due on a specific date.   For example, if XYZ corporation  issued  $100,000,000 worth of 8% bonds due 6/1/2010 the entire $100,000,000 would be due to bondholders on June 1st  2010. On June 1st bondholders would also receive their last semi-annual interest payment and their principal payment.

Serial Maturity

A serial bond issue is one that has a portion of the issue maturing over a series of years. Traditionally serial bonds have larger portions of the principal maturing in later years. The Portion of the bonds maturing in later years will carry a higher yield to maturity because investors who have their money at risk longer will demand a higher interest rate.

Balloon Maturity

A balloon issue contains a maturity schedule that repays a portion of the issue’s principal over a number of years, just like a serial issue. However, with a balloon maturity the largest portion of the principal amount is due on the last date.

Series Issue

With a series issue, corporations may elect to spread the issuance of the bonds over a period of several years. This will give the corporation the flexibility to borrow money to meet its goals as its needs change.



Introduction

Related Articles
  1. Investing

    How To Evaluate Bond Performance

    Learn about how investors should evaluate bond performance. See how the maturity of a bond can impact its exposure to interest rate risk.
  2. Investing

    How Do I Calculate Yield To Maturity Of A Zero Coupon Bond?

    Yield to maturity is a basic investing concept used by investors to compare bonds of different coupons and times until maturity.
  3. Financial Advisor

    Simple Math for Fixed-Coupon Corporate Bonds

    A guide to help to understand the simple math behind fixed-coupon corporate bonds.
  4. Investing

    Corporate Bonds: Advantages and Disadvantages

    Corporate bonds can provide compelling returns, even in low-yield environments. But they are not without risk.
  5. Investing

    The Basics Of Municipal Bonds

    Investing in these bonds may offer a tax-free income stream but they are not without risks.
  6. Financial Advisor

    Advising FAs: Explaining Bonds to a Client

    Most of us have borrowed money at some point in our lives, and just as people need money, so do companies and governments. Companies need funds to expand into new markets, while governments need ...
  7. Investing

    Key Strategies To Avoid Negative Bond Returns

    It is difficult to make money in bonds in a rising rate environment, but there are ways to avoid losses.
Frequently Asked Questions
  1. What is a reasonable amount of debt?

    It really depends on numerous factors - what stage of life you are at, your spending and saving habits, the stability of ...
  2. How are IRA withdrawals taxed?

    Learn how IRA withdrawals are taxed at retirement age and for qualified withdrawals. Consider the different tax consequences ...
  3. How does CareCredit for pets work?

    Understand how using a CareCredit credit card aids pet parents in the payment of potentially high veterinary care costs.
  4. Do 401k contributions reduce AGI and/or MAGI?

    Discover how contributing to a 401(k) plan can reduce your AGI and/or MAGI. Also learn by how much and how this differs from ...
Trading Center