TOTAL COST OF A $100,000 LOAN FOR 20 YEARS Interest Compounded Annually[198] --------+--------------------------+--------+-------- Annual | Sinking-fund Bond Com- | | Interest| pounded Annually at | | on +--------+--------+--------+Annuity | Serial Bonds | 3% | 3¹⁄₂% | 4% | Bond | Bond --------+--------+--------+--------+--------+-------- 4 |$154,431|$150,722|$147,163|$147,163|$142,000 4¹⁄₂ | 164,431| 160,722| 157,163| 153,752| 147,250 5 | 174,431| 170,722| 167,163| 160,485| 152,500 5¹⁄₂ | 184,431| 180,722| 177,163| 167,359| 157,750 6 | 194,431| 190,722| 187,163| 174,369| 163,000 --------+--------+--------+--------+--------+-------- The sinking-fund bonds are made out to run the full period and are paid for from the proceeds of the sinking-fund at the end of the term. Serial and annuity bonds are made to mature in proportion to the amounts paid each year. In the example used the serial system would retire $2000 worth of bonds each year, while with the annuity system $1800 would be retired at the end of the first year; $1900, the next; $2000, the third; $2100 the fourth, and $2200 the fifth. Interest coupons, that is, notes for the payment of interest at stated intervals and providing for interest upon the interest if not paid at maturity, are usually attached to the bonds for the entire period that they run, one to be clipped at each interest pay day. =The Term of Bonds.=--Several states and some of the large cities have issued bonds for road improvements for long series of years. This has met considerable opposition on the ground that the bonds should not run longer than the life of the improvement, otherwise there may be another series of bonds lapping upon the first, and perhaps a second and third upon these. The arguments in favor of the long terms are that some parts, at least, of the improvement will be permanent, that reconstruction will cost less than original construction so that lapping will do little harm, and that money may be obtained at a lower rate on long-term than on short-term bonds.