9.02

Investing in bonds.

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Investing in Bonds

• Bonds– Promise to pay a definite amount of money at a

stated interest rate on a specified maturity date.

• Bondholder – Individual who lends money to a corporation.

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Bond Terms

• Face Value– Amount being borrowed by the seller of the

bond.

• Coupon Rate– Rate of interest on the bond.

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Types of Bonds

• Corporate Bonds– Issued by corporations– Used to finance buildings and equipment.

• Municipal Bonds– Issued by local and state governments.– Used to finance schools, roads, airports, etc.

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T009-02.04

Types of Bonds• Treasury Bonds

– Issued by federal government.

– Known as Savings or Federal Bonds

– Types:• Series EE Bonds

– Cost half the face value.

– After a specified number of years the bond becomes worth the face value.

• Treasury Bills– Issued for three months to one year.

• Treasury Notes– Issued for two to ten years.

• Treasury Bonds– Issued for ten or more years.

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