Bonds

Market ConditionsBear Market – a period in which investment

prices fall and there is a negative sentiment about its recovery

Bull Market – a period in which investment prices are rising or are expected to rise

BondsBond – a written promise to pay a debt by a

specified date

-when you buy a bond you are giving a loan

-corporations and the government sell bonds to raise money

Bonds (cont.)-stockbrokers handle bond transactions

-guaranteed payment unless corp. fails

-less risky than stocks = lower return

High-yield bonds (a.k.a. junk bonds)-high-risk, high return bonds sold by corporations in great risk of failing

How do you know the risk of a bond?1. Look at the bond’s rate of return.

-higher the rate, higher the risk

2. Bond Rating Services-evaluate corps. financial situations and rate

according to ability to pay-Ex. Moody’s, Standard and Poor’s-ratings found at library, stockbrokerage,

internet

What to know when searching for bondsAlmost all bonds have a $1,000 face value

Price – given in percentage of face valueCoupon – the interest rate for the bond

-most rates are fixed with two coupon payments per year

Maturity – the date on which the repayment of the principle is due