Chapter 11 Section 2 Financial assets and their Markets

Bonds as Assets Bond Long Term contract requiring Payment at specific times including interest Bond Components Coupon Rate Stated Interest on the Debt Maturity Life of the Bond Par Value Total Amount that must be repaid by the Lender

Yields Current Yield Annual Interest divided by the purchase price Ratings Binds are rated based on credit worthiness Go from AAA to D, see bond chart on page 298

Assets and their charecteristics CD’s Loans by Investors to institutions Penalty for taking money early Corporate Bonds Issued by corporations Junk Bonds are High risk rated BB or lower Municipal Bonds Issued by state and local gov’s Typically Tax Exempt, no tax charged

Con’t Savings Bond Lower Denominations, issued by the Federal Government, non-transferable Purchased at a discount A beneficiary is designated, someone who will get the bond

More Treasury Notes Issued in 2 – 10 year terms by the Treasury Treasury Bonds Issued in 10 to 30 Year Terms Treasury Bills Issued in very short Terms Sold on a discount basis IRA’s Individual Retirement Accts

Markets Primary Market Market where only the original issuer can sell or repurchase an asset CD’s, Gov Bonds, IRA’s Secondary Market Where existing assets can be resold to another person