In all of these forms of debt-making the chief problem of the practical financier is to fix the rate of interest as near as possible to the market rate. It is best that it should not be below the market rate, for in that case the bonds will sell for less than par, and the government will have to pay back a larger sum than it receives. This addition is accumulated and compounded interest, which it would, presumably, have been easier to pay in annual instalments than at one time. The amount of the discount at which the bonds will sell depends on the length of time that they have to run.

When the market rate of interest falls, as it generally does in time of peace, below that at which the debt was contracted, it is generally desirable to reduce the rate of interest on the debt. If, therefore, the government can call in its bonds, it goes through the process of refunding; that is, it issues new bonds at the new rate of interest and pays off the old with the proceeds. This advantage is peculiar to the perpetual bonds, and is consequently made use of whenever the rate of interest falls, which fact can be ascertained from the quotations of the bonds on the stock market.