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Bonds
PowerPoint Notes

CIVICS
PERSONAL-FINANCE

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, youll 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
www.treasurydirect.gov

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!
Its time to begin a video from Nightly
Business Report about bonds!