HIGHWAY BONDS. 



19 



For the same bond issue under the serial plan, the total annual 

 payment varies because the interest varies, but each yearly payment 

 of interest and principal is nevertheless fixed. 



Under the sinking-fund plan the annual payment necessary for prin- 

 cipal and interest is theoretically constant, but it depends upon the 

 interest realized upon the sinking fund. It is not safe, as a rule, to 

 estimate this interest at more than 3| per cent. Then for a $100,000 

 20-year loan, with annual interest on the sinking fund, the total 

 annual payment would be $8,536.11. If the sinking fund could earn 

 the rate of interest which is paid upon the loan there would be no 

 advantage in expense to the community in the annuity or the serial 

 bond over the sinking-fund bond. There is given in Table 13 the 

 total mill tax on $1 to retire a bond issue of $100,000 by the sinking 

 fund or the annuity plan. 



Table 13. — Annual mill tax on $1 for interest and retirement on a bond issue of $100,000, 

 at 5 per cent annual interest, for terms of 10 and 20 years. 



Valuation. 



Mill tax. 



10 years. 



20 years. 





















Sinking-fund plan. 1 



Annuity 



Sinl 



ing-fund plan. 1 



Annuity 



















3 per 



3J per 



4 per 



plan. 2 



3 per 



3i per 



4 per 



plan. 2 





cent. 



cent. 



cent. 





cent. 



cent. 



cent. 





SI, 000, 000 



13.723 



13.524 



13.329 



12. 950 



8.722 



8.536 



8.358 



8.024 



1,500,000 



9.149 



9.016 



8.886 



8.634 



5. 814 



5.691 



5.572 



5.350 



2,000,000 



6.861 



6.762 



6.665 



6.475 



4.361 



4.268 



4.179 



4.012 



2, 500, 000 



5.489 



5.410 



5.332 



5.180 



3.489 



3.414 



3.343 



3.210 



3, 000, 000 



4.574 



4.508 



4.443 



4.317 



2.907 



2.845 



2.786 



2. 675 



3, 500, 000 



3.921 



3.864 



3.808 



3.700 



2.492 



2.439 



2.388 



2.293 



4,000,000 



3. 431 



3.381 



3.332 



3.238 



2.180 



2.134 



2.090 



2.006 



4,500,000 



3.050 



3.005 



2.962 



2.878 



1.938 



1.897 



1.857 



1.783 



5,000,000 



2.745 



2.705 



2.666 



2.590 



1.744 



1.707 



1.672 



1.605 



5,500,000 



2.495 



2.459 



2.423 



2.355 



1.586 



1.552 



1.520 



1.459 



6,000,000 



2.287 



2.254 



2.222 



2.158 



1.454 



1.423 



1.393 



1.337 



6,500,000 



2.111 



2.081 



2.051 



1.992 



1.342 



1.313 



1.286 



1.235 



7.000.000 



1.960 



1.932 



1.904 



1.850 



1.246 



1.219 



1.194 



1.146 



7, 500, 000 



1.830 



1. 803 



1.777 



1.727 



1.163 



1.138 



1.114 



1.070 



8, 000, 000 



1.715 



• 1. 691 



1.666 



1.619 



1.090 



1.067 



1.045 



1.003 



8,500,000 



1.614 



1.591 



1.568 



1.524 



1.026 



1.004 



.983 



.944 



9,000,000 



1.525 



1.503 



1.481 



1.439 



.969 



.948 



.929 



.892 



9,500,000 



1.445 



1.424 



1.403 



1.363 



.918 



.899 



.880 



.845 



10.000,000 



1.372 



1.352 



1.333 



1.295 



.872 



.854 



.836 



.802 



1 With interest compounded annually. 



2 The tax for the serial plan is slightly less, but varies from year to year. 



It is quite probable that so many 30-year bonds are issued hi order 

 to take advantage of the fact that bonds of that term result in a low 

 annual charge for interest and sinking fund. It will be seen from 

 Table 14 that very little advantage is gained by fixing the term of a 

 bond longer than 30 years. The annual charge decreases very slowly 

 from that point, whereas the total charge increases rapidly. 



