Maturity Structure

New issues of bonds may be structured to mature in one of two ways. First are term bonds, which reach maturity on the same date. Term bonds offer a single interest rate.

Example: A corporation issues $20 million of term bonds with a maturity of 10 years. This means that all bonds will mature at the end of 10 years and the corporation must repay the entire $20 million of principal at maturity.

Second are serial bonds, which are issued such that groups of bonds mature at different installment periods over a set length of time.

Example: A corporation issues $20 million of serial bonds that come due in $2 million installments during each of the years of the bond issue’s 10-year life.

Serial bonds with a balloon maturity have one maturity, most o