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What is a Bond?. The Stock Market Game. A bond…. Is like an IOU When you buy a bond, you’re lending money to the issuer Corporation, the government, or a government agency Has a fixed interest rate The coupon rate You get paid interest routinely

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What is a Bond?


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what is a bond

What is a Bond?

The Stock Market Game

a bond
A bond…
  • Is like an IOU
    • When you buy a bond, you’re lending money to the issuer
      • Corporation, the government, or a government agency
  • Has a fixed interest rate
    • The coupon rate
      • You get paid interest routinely
      • You get repaid the principal or “face value”
        • Most bonds have a $1000 face value
how is bond interest paid
How is bond interest paid?
  • A treasury bond will pay 3% interest a year for 30 years.
    • The investor will receive $30 per year, or a total of $900 at the end of 30 years
  • A corporate bond will pay 6% interest each year for 2 years.
    • The investor will receive $60 per year, or a total of $120 at the end of 2 years
bond rating
Bond Rating
  • Bonds are rated
    • “Investment grade bonds”
      • Highest rating by Moody’s, Standard & Poor’s and Fitch
      • Considered the safest of bond investments
      • Has the least chance of missing interest payments or failing to pay back the face value (principal)
terms to know
Terms to Know:
  • Fixed-Income Investments: Pay interest on a set schedule. Includes corporate, municipal, agency, and US Treasury bonds
  • High-Yield Bonds: Pay a higher rate of interest than investment grade bonds. Have a lower rating. Also known as “Junk Bonds”
  • Investment Grade Bonds: From a reliable issuer
  • Issuer: An organization who issues and is obligated to pay principal and interest on a bond
  • Coupon rate: Interest rate
  • Face Amount: The principal
  • Maturity: The date when the principal amount is to be paid
purchasing bonds
Purchasing Bonds
  • http://finance.yahoo.com/
    • Investing
    • Bonds
    • Advanced Bond Screener