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Chapter 11.4 notes Bonds
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Bonds long-term loans to gov’t or firms
Pay a stated rate of interest for certain # of yrs. Rated from AAA to D – riskier bonds will be less expensive
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Gov’t bonds called Treasuries – have different maturities
They are loans to the gov’t – help finance the deficit Pay a small amount of interest Considered virtually risk free Interest earned is taxed
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Municipal bonds Loans to local and state gov’ts
interest earned is tax free Generally low-risk
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Corporate Bonds Loans to corporations
Usually pay more than gov’t bonds High risk – called junk bonds
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