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Bonds
Bernadette Archambault
Sam Edge
What are Bonds?
• Bonds are used by companies who borrow
funds for a specific length of time with a
fixed interest rate.
•
http://www.investopedia.com/terms/b/bond.asp
What is Interest?
• Interest is money being paid or charged for
money being taken out/borrowed from the
use of money
• It can also be defined as the percentage of
money borrowed that was borrowed and
will be paid back with in a given time span,
most likely a year.
 http://dictionary.reference.com/browse/interest
What is Maturity Date?
• Maturity Date is when the everythingdebt, interest, and other financial
details- are paid in full.
http://www.investopedia.com/terms/m/maturitydate.asp
What is Face Value?
• Face Value is the amount to be paid back to
the bondholder after maturity date, which
is normally around $1000.
http://www.investopedia.com/terms/f/facevalue.as
p
What is a Coupon Bond?
• A coupon bond is when partialy
payments on interest is paid back to
the loaner.
http://www.investopedia.com/terms/c/couponbond.asp
What is a Portfolio?
• A portfolio is a way to divid up different
information into different classes. Such as it
can be in stocks or in bonds or other
investments. The portfolio is a way to keep
track of the interest and to keep the risk of
losing it to a minimum.
http://www.investopedia.com/terms/p/portfolio.asp
What is Diversification?
• A diversification is a way to keep risks to a
minimum.
• http://www.investopedia.com/terms/d/diversificatio
n.asp
Types of Goverment Bonds
There are three types of goverment bonds1. Bills
2. Notes
3. Bonds
• Bills are debt protections that don't last a year
• Notes are debt protections that last 1-10 years
• Bonds are debt protections that last more than 10 years
http://www.investopedia.com/university/bonds/bonds4.asp
However there are more types of bonds that
are usesd by companies.
• Municiple Bonds, Corporate Bonds, and Zero-Coupon
Bonds.
• Municiple Bonds are also known as "munis". They have
a good advantage, because when the federal taxes
come, their returns are free. So they can be a good
investment, however it all depends on the buyer
personal sitiuation as well.
• Corporate bonds are a way for a company to issue
bonds as well as stocks. There are three lengths of time
a corporate bond can go for - less than five years, 5 to
12 or over 12 years. Also if a company is well off then
that could mean lower intrest rate for the person
investing in the company.
Zero-Coupon Bonds
• With this bond the invester pays no
coupon payments and is given the bond
for a great discount from what it is worth.
Such as a bond worth $2000 however the
invester only pays $785 and 15 years until
the Maturity Date. So you pay $785 for a
bond that in 15 years will be worth $2000.
http://www.investopedia.com/university/bonds/bonds4.asp
Similarities and Differences
The differences in these bonds are:
1) The purposes they are created for
2) Who uses them
3) How they help companies invest
4) How long they last
Junk Bonds
• A Junk Bond is a bond who's worth is BB or
lower. Howere it is marketed as a higher bond
such as AAA but that is only to attract innocent
people to invest in it.
• However that does not mean nothing. People,
after the recession, bought more Junk bonds
than Higher rank bonds.
http://www.abcsofinvesting.net/what-are-junk-bonds/
The Relationship Between
Price and Yeild of a Bond
The relationship between the price and yield of a bond is if one
goes up the other goes down. As the markets add more
interest-prices fall on the bonds causing a negitive slope in the
yield and price chart.
You can calculate the currant yield by using this formula.
Currant Rate =
Annual Dollar Interest Paid *100
Market Price
http://www.investopedia.com/university/advancedbond/advancedbond3.asp
Difference Between
Stocks and Bonds
The difference between a stock and a bond is:
Stocks are open as long as the invester wants while
bonds are until a certain maturity date. Stocks are
partial ownership by the companies they are from
while bonds is borrowing money and paying it back
within a certain time length.
Economy and How it
Affects Bonds
Treasury bonds impact the economy by providing extra
spending money for the government and consumers. This is
because Treasury bonds are essentially a loan to the
government that is usually purchased by domestic
consumers.
Who Issues Bonds? Who Invests In Bonds?
How Do You Buy A Bond? Why Should You
Buy a Bond?
Almost everyone can invest in bonds. You buy your bond
from which ever company you choose to buy from. Bonds
are a good idea to invest in becuase they benifit you in the
long run. In the future you gain intrest throughout the
years in your bond.
Do Bonds Mature During
a Certain Time?
Yes, bonds do mature during a certain time, They
mature over a period of years. Depending on how
much you put in the interrest will vary, but usually
after a year of the date purchased the bond the bond
will slowly gain interest.
Interest Rates Effects The Price Of Bonds.
Fixed Income Securities
Interest rates effect the price of bonds by The risks of
fixed-income securities such as Interest rate risk, Credit
risk and more.
• Interest rate risks are when rates are rising,
market prices of existing debt securities will fall.
• Credit risk is a change in either the issuer’s credit
rating or the market’s perception of the issuer’s
business prospects will affect the value of its
outstanding securities.
• http://www.investinginbonds.com/learnmore.asp?ca
tid=5&subcatid=20&id=163
How Do Brokers Make
Money off of Bonds?
Brokers make money off of bonds from the exchange
of bonds between the people trading it. They also have
a little risk in the process because they don't have it for
long.
http://www.investopedia.com/terms/b/bond-broker.asp
Interesting Facts
• Approximately 55 million people own savings
bonds.
• Savings bonds are a popular gift for newborns
because "one size fits all" and the gift "grows" in
value as the child grows.
• Savings bonds have been awarded to people
who bought cars, appliances, and even
cemetery plots.
• Savings bonds can earn interest tax-free for
your college education (if you meet certain
• requirements).
• Saving bonds are not subjected to the up's and
down's of the stock market.
•
http://www.econedlink.org/lessons/docs_lessons/385_FunFacts1.pdf
Questi
onsis a bond?
1. What
2. What is diversification?
3. What is maturity date?
4. About how many people have saving bonds?
5. What are junk bonds?
Answers
1. Bond are a way to borrow funds for a specific length of
time with a interest rate that is the same.
2. Diversification keeps the risk of losing information to a
minimum.
3. Maturity date is the debt, interest are paid off in full.
4. About 55 million people own savings bonds.
5. Junk bonds are bonds that are BB or lower but are
marketed at AAA to get people to buy it . However after the
recession alot of people have bought junk bonds.
Addition Information
It is a type of a portfolio that purpose is to ruduce to risk of
losing everything at once. It can be in bonds or real estate, it is
to prevent a company from losing everything in one shot. Such
as real estate could fall while bonds are the same. The company
only lost only one portion of their assets.
http://www.investorwords.com/1504/diversification.html
Stocks are part of a company that is divided up into
portions that people can buy to be part of the company.
Bonds have a maturity date while stocks do not. Bonds are
loans that are paid back over time by debtor to the creditor.
http://en.wikipedia.org/wiki/Bond_(finance)
http://en.wikipedia.org/wiki/Stock#History
Additional information
You can purchace a bond through your bank however if your
bank does not have the means for one you can open a
gaverment bond throught the Treasury Direct. A person can
buy a bond directly from the Treasury.
Zero-coupon bonds is invested in copmanies but you don't
recieve interest payment during the time the copmany has your
money.
Coupon bonds is when interest is paid more annually.
A junk bond is the same as a regular bond expect that it is like
an IOU from a company.
http://www.investopedia.com/university/bonds/bonds6.asp
http://www.finweb.com/investing/zero-coupon-bonds.html
http://www.wisegeek.com/what-is-a-coupon-bond.htm
Additional infromation
Bond Rating Grade Risk Moody's Standard & Poor's
AaaAAAInvestmentLowest Risk
Aa AAInvestmentLow Risk AAInvestmentLow Risk
BaaBBBInvestmentMedium Risk
Ba, BBB, BJunkHigh Risk
Caa/Ca/CCCC/CC/CJunkHighest Risk CDJunk
In Default
The End