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Bonds
PowerPoint Notes
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CIVICS
PERSONAL-FINANCE
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.
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.
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.
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.
Why do People Invest in
Bonds?
 Bonds generate a regular source of
income.
 Depending on the type of bond, there are
certain tax advantages.
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.
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, you’ll 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.
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
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.
Good News!
 It’s time to begin a video from Nightly
Business Report about bonds!