7.02 A Who Uses Credit? PERF Objective 7.02 Students will understand the users of credit.
Who Uses Credit? • Consumers • Credit used by people for personal reasonsconsumer loans, mortgage loans, credit cards, charge card • Businesses • Credit used by businessescommercial loans, corporate bonds • Government Credit • credit used by local, state, federal governments • Municipal bonds • Savings bonds • T- bonds, T-bills, T-notes
Government Credit USA IOU trailer link • Federal government - uses credit to pay for: • Public services and programs provided for its citizens • Examples-military, foreign aid, roads, courts, prisons • Loan sources include: Federal savings bonds, treasury bills, bonds, notes • State & local governments-use credit to pay for: • highways, water systems, public housing , and stadiums, airports • Loan sources : municipal bonds, school bonds
Government Credit • Municipal Bonds • State and local governments use to finance projects • Savings Bonds • Sold by federal government • T-bills, T-notes, T-bonds
Bonds Bonds – written promise to repay a loan with interest on a specific date Buyer of the bond is the creditor • Corporate Bonds • Usually used to finance buildings and equipment • Blue chip companies vs. junk bonds • Part of investment portfolio Bond is an investment for creditor/Loan for the issuer