1. Aim: Why should/shouldn’t you invest in bonds?

2. Investing in Bonds
Bonds are loans you make to corporations or governments (bond issuers). In return they pay you interest.

3. I. How Do Bonds Work?

4. II. Bond Terminology Par or Face value: The original loan
Maturity: When it comes due
Coupon Rate: The interest rate (coupon v. zero coupon)
Yield: how much you make

5. III. Bond Ratings Standard & Poors & Moody’s evaluate bonds.
Based on financial stability of the issuer

6. IV. Types of Bonds Junk Bonds
Corporate or municipal bonds with low ratings
High risk =

7. US Savings - Easy to purchase
Inexpensive
Can’t be traded

8. 1. US Treasury Notes, Bills & Bonds
Short term, medium term & long term loans to the government.
They are generally considered as good as gold. Backed by the full faith and credit of the government.
Sold in $1000 units

9. 2. Municipal Bonds
Millions of bonds have been issued by state and local governments.
Tax exempt
Pay lower interest than comparably rated corporate and US Treasury bonds

10. 3. Corporate Bonds Major source of corporate borrowing.
Higher yield than government bonds

11. “Borrowing is not much better than begging, just as lending with interest is not much better than stealing.”