Marietta Hotels used a twenty-five-year, $50 million bond issue to finance its expansion. In its plan to ensure that funds would be available to redeem the bonds at maturity, it arranged that none of the bonds would mature during the first fifteen years. Therefore, 10 percent of the bonds mature each year until all the bonds are retired at the end of the twenty-fifth year. This is an example of the ____ method of repayment.

Question

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This is an example of the serial bond method of repayment, where a portion of the bonds mature each year until the entire issue is retired. It is not the sinking fund method, where funds are set aside each year to retire the debt, or the selling new or old bonds methods. It is also not the registered bond method, which refers to how ownership of the bonds is recorded.

Marietta Hotels Used a Twenty-Five-Year, $50 Million Bond Issue to Finance