1. Assets and Investments, Cont’d Bonds & Cash Equivalents

2. Bonds A bond is generally a
Companies and governments issue bonds to fund their day-to-day operations or to finance specific projects.
When you buy a bond, you are loaning your money for a certain period of time to the issuer.

3. Bonds, cont’d
The holder of the bond purchases it for a set price and the issuer pays the holder a set amount at a regular period until the bond is paid in full
In return, bond holders get back the loan amount plus interest payments.

4. Different Types of Bonds:
Treasuries
U.S. Government bonds
The repayment of principal is accompanied by a fixed interest rate.
Guaranteed by the ‘full faith and credit’ of the U.S. government
Treasuries make interest payments semi-annually and the income that holders receive is only taxed at the federal level.

5. Types of Treasuries: Treasury Notes Treasury Bills Treasury Bonds
A marketable U.S. government debt security with a fixed interest rate and a maturity between ___________________________________. Treasury notes can be bought either directly from the U.S. government or through a bank.
Treasury Bills
A short-term debt obligation backed by the U.S. government with a maturity of_______________________________. T-bills are sold in denominations of $1,000 up to a maximum purchase of $5 million.
Treasury Bonds
A marketable, fixed-interest U.S. government debt security with a maturity of __________________________________________. Treasury bonds make interest payments semi-annually and the income that holders receive is only taxed at the federal level.

6. Different Types of Bonds Continued…
Municipal Bonds
Municipal bonds are debt obligations issued by states, cities, counties and other governmental entities, which use the money to ___________________________________________.
Corporate Bonds
Corporate bonds are debt obligations, or IOUs, issued by private and public corporations. They are typically issued in multiples of $1,000 and/or $5,000. Companies use the funds they raise from selling bonds for a variety of purposes, from building facilities to purchasing equipment to expanding their business.

7. Bonds, cont’d
Most bonds are bought and sold, and resold over- the-counter.
The OTC market consists of hundreds of financial institutions and brokerages that buy and sell over the phone or via computer networks.
Most people purchase bonds through mutual funds.
Value of the Bond Market
Total Value of the US Bond Market
Total Value of the Global Bond Market

8. Cash Equivalents
Cash Equivalents are investments that are highly liquid meaning they can be converted to cash with very little trouble.
Examples:
U.S. government Treasury bills,
Bank certificates of deposit,
Corporate commercial paper,
And other money market instruments.

9. Cash Equivalents, cont’d
Typically, cash equivalents have low interest rates. A 1% interest rate on a cash equivalent is AMAZINGLY high
Gold / Silver???

10. Homework #5
This assignment is to help you gain a better understanding of stocks and bonds
Using the internet, look up the stocks that are included in the DJIA, the S&P 500, and the Nasdaq Composite (Note: you can NOT use the one listed in the example)
Pick three from each and list the close price of the day, any dividend, when it is paid, the YTD appreciation, 5 year appreciation
Do some research on bonds. Besides the US Government, local government and companies, who else can issue bonds?
Is Flagstaff issuing or holding any bonds currently?
What is the current yield on the 10 year T-Note? How does this yield compare to the yield from 5 years ago? What does that mean for the US government?
Go to a bank’s website (BoA, Wells Fargo, Citi, Ally, Compass, etc) and look up their rates of cash equivalents. You should compare CD’s, Savings and Money Markets from at least 3 banks.