$ $ $ CIVICS PERSONAL-FINANCE Bonds PowerPoint Notes

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

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!