Interest Rate – SVCW pays interest to investors in exchange for the use of the loaned money. The interest rate is a percentage of the principal (the amount borrowed), accruing over a specified period. Interest on bonds or notes with fixed interest rates typically is compounded and paid semiannually. Interest on bonds or notes with variable interest rates accrues at a rate which changes periodically based on specific criteria.
Price - The price is the amount investors are willing to pay based on certain variables, including current market yields, supply and demand, credit quality, maturity and tax status. Keep in mind that price and yields move in opposite directions. When market yields increase, the value of a bond or note decreases, and vice versa.
Yield - The yield generally refers to the return an investor earns on the bond or note. The yield is calculated in two ways: based on the market price and interest rate; or by taking into account a number of factors, including interest rate, market price, maturity date and the time between interest payments. Investors should consult their brokers or other financial advisors to learn more about yield.
Maturity - Maturity is the date when the principal on the bond or note is scheduled to be repaid to the investor. SVCW generally sells bonds that have maturities between 1 and 30 years. In general, the further out the maturity date, the higher the investor’s yield.
Redemption Provisions - Some bonds or notes contain provisions that allow SVCW to redeem, or “call,” all or a portion of the bonds or notes, at specific prices, prior to their maturity dates. Bonds frequently are called when interest rates are lower than when SVCW sold the bonds. Bonds or notes with redemption provisions usually offer investors higher yields to compensate for the risk that the bonds might be called early. When SVCW calls a bond or note, it pays the holder the principal amount and any interest earned since the last interest payment. However, the holder does not receive the interest that would have been earned if the bond had been allowed to reach its maturity date. Holders of callable bonds or notes are notified of impending calls. Investors can find out if their State bond or note has been called by calling SVCW Finance at (650) 591-7121. Investors should have their CUSIP (Committee on Uniform Securities Identification Procedures) number – a unique identifying number – available when calling.
Creditworthiness - Most municipal bonds and notes are rated by one or more of the three major rating agencies: Fitch Ratings, Moody’s Investors Service, and Standard & Poor’s. A credit rating is an independent assessment of the creditworthiness of the bonds. It measures the probability of timely repayment of principal and interest of a bond or note. Higher credit ratings indicate the rating agency’s view that there is a greater probability the investment will be repaid. More information about credit ratings, the current ratings for SVCW revenue bonds and a history of SVCW bond ratings can be found at its investor relations website.