Financial Assets

Bonds Bond – a formal long-term contract that requires repayment of borrowed money and interest Bond Components Coupon Rate – stated interest Maturity – the life of the bond Par Value – the principle or initial amount borrowed

Types of Financial Assets Certificates of Deposit (CDs) Most common form of investment Attractive to small-amount investors because they can cost as little as $500 Length of maturity can be tailored by investors Federally insured by FDIC up to $250,000

Types of Financial Assets Corporate Bonds Can be as low as $1,000, but generally par value is $10,000 The more stable the company, the less risk involved and lowest yield rate The most risky bonds are referred to as Junk Bonds and offer large yield rates Bonds rated by Standard & Poor’s or Moody’s

Types of Financial Assets Municipal Bonds “Munis” Bonds issued by state and local governments Help to pay for projects, i.e. parks, schools, stadiums Tax-Exempt!

Types of Financial Assets Government Savings Bonds Low-denomination Purchased at a 50% discount 30 year maturity Easy to obtain

Types of Financial Assets Treasury Notes US Government issued debt obligations Mature from 2 to 10 years Treasury Bonds Same ideas as a Treasury Note Matures in 30 years Both pay interest every 6 months until the bond matures

Types of Financial Assets Treasury Bill (T-Bill) Short term obligation Maturity of 4, 13, 26, or 52 weeks Do not pay interest direct, but are sold on a discount

Types of Financial Assets Individual Retirement Accounts (IRAs) Long-term Tax deferred – taxes are paid when you retire and take money out, taxed in a lower tax bracket $5,500 yearly contribution limit or $6,500 if you are over 50 Penalty if money is taken out early