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Answer: Treasury bills, notes and bonds are sold by the U.S. Treasury Department. These are the safest investments in the world, since they are backed by the U.S. Government. Since they are so safe, they tend to have the lowest interest rates. Treasury bills, notes and bonds are sold at auction. This means they can be bought for more or less than the face value, depending on demand. For example, when demand is high, bidders will pay more than face value. Bidders know Treasury bills, notes and bonds can be resold on the open market. This means their the price can fluctuate further. The interest rate is paid every six months, and does not change throughout the term of the product. If you hold onto them until term, you will get back the face value plus the interest that was paid over the life of the bond, no matter what you paid for them at auction. The minimum investment amount is $10,000, placing them out of reach for many individual investors. The interest rate paid should not be confused with the Treasury yield. This is the total return over the life of the bond.Since they are sold at auction, Treasury yields change every week. Here's how it works: If demand is low, bonds are sold below face value, which is similar to getting them on sale. Therefore, the yield is high. They buyers get more for their money. When demand is high, they are sold at auction above face value, and the yields is low. The buyers had to pay more for the same interest rate, so they get less for their money. The difference between bills, notes and bonds are the length until maturity:
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Treasury bills are issued for terms less than a year. Treasury notes are issued in terms of 2, 3, 5, and 10 years. Treasury bonds are issued in terms of 30 years, and were reintroduced in February 2006.
Often Treasury bills, notes and bonds are simply called "bonds" for short. They are also often referred to as "Treasuries." (Updated January 2, 2010) Question: What Are Savings Bonds? Answer: When most people talk about savings bonds, they mean the EE Series savings bond. These are like Treasury bonds for the individual investor. The good news is they can be bought with as little as $25, you will never lose your principle, and the interest rate earned is exempt from state and local income tax. The bad news is the interest rate doesn’t change for the life of the bond, so your return might not keep up with inflation, depending on the interest rate. Also, your money is tied up for five years, as there is a penalty if you redeem the bonds before that date. The easiest way to purchase them is via Treasury Direct.
Question: What Are I Bonds? Answer: I Bonds are like Series E Savings Bonds, except for one important advantage. The interest rate is adjusted for inflation every six months. Otherwise, they have the same pluses and minuses. The good news is that I Bonds can be bought with as little as $25, you will never lose your principle, and the interest earned is exempt from state and local income tax. The bad news is your money is tied up for five years, as there is a penalty if you redeem the I Bonds before that date.
By following these averages and exchanges.The easiest way to purchase I Bonds is online. they will invest in bonds. and are rated as to their risk by Moody's or Standard & Poor's. The alternative is to go public and raise equity by selling stocks. they generally have have slightly lower interest rates than taxable bonds. then the they will invest in stocks. The higher the risk. or if there are threats in the global economy. including the Dow Jones Averages. Keep in mind that these are general trends. but those that do find the price of the bond itself changes based on supply and demand in an open market. from your financial advisor. Investors often add some high yield bonds to their bond portfolio to gain higher returns than regular bonds without the higher volatility of stocks. the higher the return the corporation must promise. they tend to invest in gold and other hard commodities. since there is a chance the company can go bankrupt and default on the bond. they tend to have the highest return for bonds to compensate for the additional risk. Government. Muni's. municipal bonds are considered very low risk. Therefore. while still complicated. You can purchase high yield bonds either individually or through a high yield fund through your financial advisor. Question: What Are Municipal Bonds? Answer: Municipal bonds are issued by various cities. Question: What Are Corporate Bonds? Answer: Corporate bonds are issued by various corporations. not hard and fast rules.S. As a result. since a strong economy helps companies improve their earnings. You can buy them from a registered municipal bond seller. They are less safe than government bonds. Question: What Are the Components of the Stock Market? Answer: The broader definition of the stock market includes several different stock exchanges. you can get a pretty good indication of how the stock market investors think the economy is doing. Corporate bonds offer corporations a relatively safe way to gain funds for investment in the company's growth. If investors are unsure. If investors think the economy is growing. or through a bond fund. Selling bonds. which are a safer investment. which is what makes learning about the stock market so much fun! . If investors think the economy is slowing or stagnant. as they are called. (Source: Investing in Bonds. from the U.com). They have been rated as “not investment grade” by Standard & Poor's or Moody's because the company is not fiscally sound. via Treasury Direct. or indirectly through a municipal bond fund. This is a long and expensive procedure. This is why they are also known as high yield bonds. You can buy corporate bonds individually. NASDAQ. and the NYSE as well as the commodity and bond markets. Question: What Are Junk Bonds? Answer: Junk bonds are corporate bonds that are least safe. Most individual municipal bond holders do not sell during the life of the bond. Since very few cities default. are attractive to individual investors in higher tax brackets because the interest income is tax free. is relatively much easier and provides a quicker way to raise capital for corporate expansion.
In addition. economy in three sectors: industry. Rule 144A. The Dow Jones Industrial Average (DJIA). which tracks 15 utility stocks. The new company. 3. It is a lagging indicator. 2. structured products and ETFs. It also offers trading in derivatives. The Dow Jones Utility Average. then that may mean that demand has fallen for those companies' products. When your stockbroker executes your order to sell. Question: What is the New York Stock Exchange? Answer: The New York Stock Exchange (NYSE) lists over 2. NASDAQ was founded in 1971. The market capitalization of these stocks account for nearly one quarter of the total U. board relationships. . This rule allows the immediate resale of private placement securities among qualified institutional buyers without requiring public registration. The editors of The Wall Street Journal select companies which they feel best represent all companies within these three sectors. The NASDAQ OMX Group also offers public companies tools to help with investor relations. their profits are enhanced by low interest rates. making it a leading indicator. transportation and utilities. For example. a Stockholm-based operator of exchanges located in the Nordic and Baltic regions. which tracks airline.S.Question: What Are the Dow Jones Averages? Answer: The Dow Jones Averages are stock market indices that represent the U. lists stocks of over 3. and they aren't being shipped. it became associated in people's minds with technology stocks.S. and provided quotes for Over-theCounter (OTC) stocks not listed on other markets. It is where the stocks that are measured by the Dow Jones Averages are traded. commodities. It helps them raise capital through the U. The Dow Jones Transportation Average. it provides exchange technology. which helps in stock trading. That is why it might sell for a slightly different price than it was when you placed the sell order. market. and news dissemination. market intelligence. it provides services to over 70 other stock exchanges in more than 50 countries. it merged with OMX ABO. Therefore. Today.800 companies. it is not completed until one of the brokers on the floor of the New York Stock Exchange finds another broker to buy it. the Utility Average declines when investors are expecting increases in interest rates. For that reason. trucking and shipping companies. If the DJIA increases. NASDAQ is the largest electronic equities exchange in the U. The three Dow Jones indices are: 1. NASDAQ OMX Group. It is the most quoted market indicator in the world. This is because transportation companies can only make their profits after the product has been manufactured and is available to ship. but the Transportation Average doesn't. which tracks the share price of 30 companies which best represent their industries.S. Since utility companies are big borrowers.S.500 companies. Members of the New York Stock Exchange are the brokers who actively trade stocks on the floor. Question: What Is NASDAQ? Answer: NASDAQ originally was the acronym for the National Association of Securities Dealer Automated Quotation system. debt. In 2008. which means it can be used to confirm the trend set by the Dow Jones Industrial Average. clearing and regulatory solutions.
which is allelectronic. The stock and bond mix in a mutual fund is developed by the mutual fund manager to meet a particular invesment goal. Vanguard and American. .The NYSE is moving to an all-computerized trading system to compete with the NASDAQ. Question: What Are Mutual Funds? Answer: Mutual funds are compilations of individual stocks that are developed by mutual fund companies such as Fidelity. They tend to be less risky than buying individual stocks because they are a diversified investment. while others might be country-specific. Some mutual funds follow industries. These mutual funds can be any combination of any type of stock and/or bond.
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