1. Financial Assets

2. 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

3. 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

4. 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

5. 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!

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

7. 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

8. 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

9. 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