Presentation on theme: "LAP: QS-033 Objectives Describe the purpose of bonds. Explain how to buy and sell bonds."— Presentation transcript:
Objectives Describe the purpose of bonds. Explain how to buy and sell bonds.
Describe the purpose of bonds. Objective
Corporations and governing bodies ask people to lend them cash when they issue bonds. Bonds and Lending
Bond = a loan to a governing body or corporation Bonds and Issuers The money is borrowed: at a particular interest rateat a particular interest rate Issuer = the borrower for a particular period of timefor a particular period of time
Bonds have an inverse relationship to the stock market.Bonds have an inverse relationship to the stock market. When the stock market goes up, bond prices go down.When the stock market goes up, bond prices go down. Bonds and the Stock Market
Characteristics of Bonds (How to know what a bond will pay you) Coupon rate = interest rateCoupon rate = interest rate Maturity date = day of repaymentMaturity date = day of repayment Face value (par value) = original investmentFace value (par value) = original investment Due May 18, 2008 $1000
Explain how to buy and sell bonds. Objective
Benefits: Pros and Cons Providing reliabilityProviding reliability Meeting goalsMeeting goals Doing well in a poor economyDoing well in a poor economy
Pros and Cons Drawbacks/Risks: Interest-rateInterest-rate LiquidityLiquidity RepaymentRepayment DefaultDefault
Bond rating = a company’s “letter score” based on its financial responsibility Will the Corporation Default? Source: Investopedia.com
You can find a bond table in an investment newspaper. Bond Table Categories: Issuer = borrowerIssuer = borrower Coupon = interest rateCoupon = interest rate Maturity date = day of repaymentMaturity date = day of repayment Bid price = what others are willing to pay for the bondBid price = what others are willing to pay for the bond Yield = what the bond will bring you over time at a particular bid priceYield = what the bond will bring you over time at a particular bid price
Diane is preparing for retirement.Diane is preparing for retirement. She wants to put her money into reliable bonds.She wants to put her money into reliable bonds. What would you recommend?What would you recommend? Help Me Invest! Quick Case
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