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All About BONDS. What are they? CORPORATE BOND a corporation’s written pledge to repay a specific amount of money, along with interest. GOVERNMENT BOND.

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Presentation on theme: "All About BONDS. What are they? CORPORATE BOND a corporation’s written pledge to repay a specific amount of money, along with interest. GOVERNMENT BOND."— Presentation transcript:

1 All About BONDS

2 What are they? CORPORATE BOND a corporation’s written pledge to repay a specific amount of money, along with interest. GOVERNMENT BOND written pledge of a government or municipality (city) to repay a specific sum of money with interest

3 BOND BASICS 3-5% Return Over Time SHORT TERM <10 years LONG TERM years GOVERNMENT Safest, federal gov. isn’t going anywhere, lowest return MUNICIPLE Pretty safe, includes local and state governments CORPORATE Longer term usually has a better return than shorter term, but you are betting the co. will still be around HIGH YIELD (JUNK) Highest rate of return, but the riskiest of all the bonds

4 CORPORATE BONDS Legal document that details all the conditions of the bond Bond Indenture When a bond will be repaid (usually 1-30 years) Maturity Date Dollar amount bondholder will maturity. Corp bonds usually have a face value of $1000 Face Value Allows a company to buy back bonds before they mature. Usually the company pays a fee to the holder if they do this Call Feature Interest rate Coupon

5 How BONDS Work: 1.You pay $1,000 for a 15 year AT&T Bond at 7.5% interest/year. 2.Each year, you get $75 (1000*.075) 3.After 15 years, you get your $1000 back TOTAL EARNED = $75*15 years = $1125

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7 GOVERNMENT BONDS TREASURY BILLS (T-BILLS) Sold in units of $1000 Mature in weeks (4, 13, 26, 52) “Discounted Security” – you pay LESS than the face value TREASURY NOTES Sold in units of $1000 Mature in 10 years Higher rate than a T-Bill US SAVINGS BONDS Purchase price is ½ Face Value ($100 Bond costs $50) Can redeem anytime from 6m to 30y (get what you paid + interest) Not taxed by state, but must pay FED taxes when you cash it in

8 What Does a Savings Bond Look Like?

9 How to buy government bonds, or look up your bond info:


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