The company invests in residuals, whose interest and principal repayments are very uncertain.

In practice, therefore, these principal repayments took the place of depreciation.

If it was to be provided in addition to principal repayments in the revenue account, then local authorities' capital would increase.

Thus we can calculate the money value of the final coupon payment and principal repayment on 30 March 1988 as follows.

"In effect, there is a separate guarantee from the Treasury on the principal repayment and interest coupons."

Intuitively, this is because most of the principal repayment happens at the end.

The new notes mature on Oct. 1, 1997, with no principal repayment required before then.

These principal repayments will be paid in future years.

Should gold prices be higher, however, they will see their principal repayment reduced by the percentage amount gold rose above the $385.90-an-ounce level.

On the other hand, when American debt is held by overseas investors, they receive interest and principal repayments.