1 / 7

What is a Bond?

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

vesna
Download Presentation

What is a Bond?

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. What is a Bond? The Stock Market Game

  2. 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

  3. 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

  4. Types of Bonds

  5. 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)

  6. 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

  7. Purchasing Bonds • http://finance.yahoo.com/ • Investing • Bonds • Advanced Bond Screener

More Related