1. Bonds The last subject of Fall 2011

2. What is a bond?? A debt security (pay interest) A formal contract to repay borrowed money with fixed intervals Like a loan Lender (creditor) Borrower (debtor) Provides Borrower with external funds To finance investments, or finance current expenditure

3. Bonds vs. Stocks What’s the difference between bonds vs. stocks?? Stockholders have equity stake in the company Bondholders have a creditor stake in the company Bonds have a defined term or maturity Exceptions: consol bond: no maturity

4. Government Bonds Issued by national governement usually in the country’s currency. First was issued by the English government 1693 (raise money against war with France)

5. English Bonds

6. US Bond

7. War Bonds

8. Generates capital for the government Makes civilians feel involved in their national militaries Controls inflation Encourages spending (when liquidated)

9. Bond Rating