Bonds

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Bonds

• PowerPoint Notes

CIVICS PERSONAL-FINANCE
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What is a Bond?

• A bond is a type of loan agreement between the
  issuer of the bond and the purchaser of the bond.
• The issuer promises to repay the amount of money
  borrowed at a fixed rate of interest over a set
  amount of time.

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Continued

• Unlike stocks, bonds do not represent ownership
  in a corporation.
• However, bond owners receive priority over
  stockholders when it comes to repayment if the
  company that issues the bond goes out of business.

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Continued

• Bonds are classified as a fixed income
  investment.
• This means that the bond will generate a fixed
  amount of interest income.
• Bonds are typically considered to be safer
  investments than stocks.

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Why do Governments and Corporations Issue Bonds?

• Governments and corporations issue bonds to raise
  money to help finance their operations.
• Issuing bonds is less costly and restrictive than
  borrowing money from a traditional financial
  institution like a bank.

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Why do People Invest in Bonds?

• Bonds generate a regular source of income.
• Depending on the type of bond, there are certain
  tax advantages.

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Government Bonds

• Governments at all levels (federal, state, and
  local) issue bonds.
• We are going to talk about the most common types
  of government bonds and securities found in the
  United States.
• Today we are going to talk about U.S. Savings
  Bonds.

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U.S. Government Savings Bonds

• These bonds will earn interest for up to 30
  years.
• If the savings bond is redeemed within five years
  of purchase, youll pay a penalty equal to the
  three most recent months of interest.
• Savings bonds typically pay a higher rate of
  interest than savings accounts.
• Savings bonds are not as liquid as savings
  accounts.

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Savings Bonds Continued

• There are two basic types of U.S. government
  savings bonds.
• These are
• Series EE and I-Bonds
• Both of these bonds may be purchased from almost
  any financial institution or directly from the
  government at www.treasurydirect.gov

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Corporate Bonds

• This is a bond that has been issued by a
  corporation.
• Corporations issue bonds to help expand their
  businesses.
• Corporate bonds are considered to be higher risk
  than government bonds and typically pay higher
  rates of interest.

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Good News!

• Its time to begin a video from Nightly Business
  Report about bonds!