Name: _________________________________ Period ________ Date ____/____/____
Investing in Government Bonds
Minds on the Markets
Module 03 – Lesson 6
1. Government Bonds
1.1. There is / are:
1.1.1. _______________________________________________ Federal government
1.1.2. _________________________________________________ State governments
1.1.3. _______________________________________________ county governments
1.1.4.Even more local governments, such as ________________________________
and ______________________________________________________________
1.2. Why do governments need to raise money? Don’t they collect the money will they
spend by taxing us?
1.2.1.Answer: Sometimes this happens, and our leaders celebrate that their ability to
achieve a _________________________________________________________
But usually, they’ve made promises to spend more money than the taxes they
collect. The difference is a __________________________________________
1.2.2.Aren’t deficits a bad idea?
1.2.2.1. Answer: ________________________________________________
________________________________________________________
________________________________________________________
1.2.2.2. As well, there are political concerns. Politicians want to be reelected. Cutting government spending or raising taxes does not
make a politician popular.
1.3. We know that corporations have the ability to raise money two ways. What are they?
1.3.1.Answer:___________________________________________________________
1.4. However, one of these options is not available to governments. Which one, and why?
Name: _________________________________ Period ________ Date ____/____/____
1.4.1.Answer:___________________________________________________________
_________________________________________________________________
1.5. So, bonds it is! The department of the Federal Government that issues them is the __
_________ Department. Therefore, bonds of our Federal Government are known as
_________________________________________________________________________
1.6. Treasury bonds are backed by the “ __________________________________________
__________________ ” of the mighty U.S. Government. Thus, they are thought to be
_________________________________________________________________________
1.7. What are the three characteristics of Treasury Bills?
1.7.1.Maturities: ________________________________________________________
1.7.2.Face value:________________________________________________________
1.7.3.Purchased at a ____________________________________________ and the
_______________________________________ amount is repaid at maturity
1.8. What are the three characteristics of Treasury Notes?
1.8.1.Maturities: ________________________________________________________
1.8.2.Issued in denominations of: _________________________________________
1.8.3.Coupons are paid __________________________________________________
1.9. What are the three characteristics of Treasury Bonds?
1.9.1.Maturities: ________________________________________________________
1.9.2.Issued in denominations of: _________________________________________
1.9.3.Coupons are paid __________________________________________________
2. Government Agency Bonds
2.1. Organizations that are ______________________________________________________
2.2. Issue bonds that have ______________________________________________________
2.3. ________________________ are the most active issuers of bonds, among all agencies
Name: _________________________________ Period ________ Date ____/____/____
2.3.1.Example: _________________________________________________________
_________________________________________________________________
3. Government Sponsored Enterprises (GSE’s)
3.1. Organizations that have an _________________________________________________
_________________________________________________________________________
3.1.1.Example: _________________________________________________________
_________________________________________________________________
3.2. GSE implies that the enterprise’s bonds are ___________________________________
than other bonds because the government would not allow them to fail because of their
“implied” guarantee
4. Municipal Bonds
4.1. _________________________________________________________________________
are known as municipal governments, or simply municipalities. Money from the bonds
they issue are used to build and expand: schools, government buildings, water, power,
and sewage systems, prisons and hospitals, etc.
4.2. Why should we buy Muni Bonds?
4.2.1. _________________________________________________________________
4.2.2. _________________________________________________________________
4.3. What are the characteristics of the two types of Muni Bonds?
4.3.1.General Obligation Bonds (GO)
4.3.1.1. Issued to raise funds for __________________________________
________________________________________________________

Examples: Schools and roads
4.3.1.2. These projects serve______________________________________
________________________________________________________
4.3.1.3. Backed by the ___________________ of the issuing municipality
4.3.1.4. Interest and principal are paid with ________________________
________________________________________________________
4.3.2.Revenue Bonds
4.3.2.1. ______________________________________ producing projects

Examples: Bridges (that have tolls) Airports (that have
“airport fees”), Power and Water municipalities
4.3.2.2. _______________________________________________________
_____ pays the bondholders their interest and principal revenue
4.3.2.3. Projects that are backed by revenue bonds provide services to _
________________________________________________________
Name: _________________________________ Period ________ Date ____/____/____
Name: _________________________________ Period ________ Date ____/____/____
5. Web Challenge #1: Research three municipalities that have the highest ratings. What is it
about these states and local governments that makes them so creditworthy?
6. Web Challenge #2: Treasuries are remarkable in that they have maturities (terms) as short
as four weeks to as long as 30 years!
6.1.1.Research the range of maturities available for municipal bonds. Do they differ
from municipality to municipality or are they pretty much the same? How do
they differ from maturities available on Treasuries?
7. Web Challenge #3: Governments have found it so easy to borrow money that they often
keep borrowing to cover deficits instead of doing the hard work of balancing their budgets.
This can leave them with rather large amounts of debt.
7.1. Research and document the debt of the U.S. Government. Research the debt of the
states. Write down any that don’t have debts. Document the five most indebted states.
7.2. Hint: Visit usdebtclock.org.