- One advantage of issuing serial bonds revolves around the required cash outflows. With staggered maturity dates, the company only needs to pay to redeem the bonds due at each maturity date. This reduces the cash payments required at each maturity date and allows the company an extended period to acquire the cash necessary for redeeming all of the bonds.
- Another advantage of issuing serial bonds builds on the attraction to investors. Investors prefer to invest in bonds, because they offer a lower risk of the investor losing money. Serial bonds have even less risk because the company's cash requirements at any time are lower than they would be with a standard term bond. Investors are willing to pay more for serial bonds in exchange for the reduced risk.
- The extended repayment schedule represents a disadvantage of serial bonds. With staggered maturity dates, the company spends more years meeting the financial obligation of redeeming the bonds from the bondholders. This requires the company to continue planning for the cash outflows to meet these obligations until it pays off each of the bonds.
- Another disadvantage associated with serial bonds stems from the increased interest charges. Some of the interest payments end when the company redeems the first serial bonds at their due date. The remaining bonds continue to require the company to pay interest on them. The company continues to incur interest expense until it redeems all of the bonds. The longer it takes to redeem the bonds, the more interest expense the company incurs.
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