Glossary of Municipal Securities Terms

LEVEL PRINCIPAL

debt service schedule in which the annual amount of principal payments remains relatively constant over the life of the issue of bonds, resulting in declining annual debt service as the annual amount of interest payments declines. This is sometimes referred to as “declining debt service.”

EXAMPLE:

    Level Principal Assumptions:
    Size of issue:        $10,000,000
    Interest rate:        7 percent
    Maturity of issue:  5 years   

Debt Service Schedule – change calculations

 Years

 Principal* 

 Interest

 Total*

1

 $ 2,000,000

 $  700,000

 $ 2,700,000

 2

    2,000,000

     560,000

    2,560,000

 3

    2,000,000

     420,000

    2,420,000

 4

    2,000,000

     280,000

    2,280,000

 5

    2,000,000

     140,000

    2,140,000

 Total

 $10,000,000

 $2,100,000

 $12,100,000

*Principal remains level and total debt service declines throughout life of issue.

 See: DEBT SERVICE. Compare: LEVEL DEBT SERVICE.

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