Investing in the BOND MARKET

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Presentation transcript:

Investing in the BOND MARKET Explore how the stock and bond markets work.

Different Kinds of Bonds Savings bonds Municipal bonds Corporate bonds

Basic Parts of a Bond Coupon Rate: the coupon rate is the interest rate paid on a bond by the ISSUER. Maturity: the date the loan is repaid by the issuer. Par Value: the amount repaid (face value) repaid to the investor when the bond matures. Yield: the rate of return on a bond if held to maturity.

Buying Bonds at “DISCOUNT” A bond currently trading for less than its par value in the secondary market is a discount bond. A bond will trade at a discount when it offers a coupon rate that is lower than prevailing interest rates.

Bond Rating Investment Grade: (AAA) safe enough for banks to invest in. Default Grade: (D) tbe bond is in default status, which means either the issuer has not made interest payments &/or has not repaid the loan (face values).

The Main Types of Bonds Savings Bonds Treasury Bonds Municipal Bonds Corporate Bonds “Junk” Bonds Picture What is it? (Definition) Usual Bond Ratings? Interest Rates? (Typical) Length of Term?

Zero Coupon Bond Zero-Coupon Bond Coupon Bond