4/23/06

What exactly is a "Bond"

Bond (from dictionary.com) - A debt investment with which the investor loans money to an entity 
(company orgovernment) that borrows the funds for a defined period of time at a specified
interest rate.

      Stated in other words a bond is a defined amount of money that a company borrows with a stated 
period of loan, and a defined percentage of return. Generally intereston bonds is paid semi-annually 
(every six months) and the amount borrowed is repaid in a set period of time. (Could be 1 year, 3, 
5, 10 whatever the borrower desires- within guidelines)

      There are a number of different types of bonds. We will go over a few that you are most likely to have 
heard of. The safest of bonds are US government backed bonds. Probably you have heard the term 
“treasury bond.” These are sold at a minimum $1,000 and are generally long term to maturity (10 
years being the most common.) These are the ‘safest’ bonds, but because they are the safest they
also have the lowest interest rate. That means you are not getting a large semi-annual payment, 
but you also are in a low risk investment. (your principle is safe) for more information look HERE       

Another type of government bond is the US Savings Bonds, which maybe you are a little familiar with. 
They come in amounts from $25 to $10,000 and can earn interest and gain value.         

This is what your Grandma might have given you at your high school graduation. These need to be held 
at least 5 years, so you don’t lose any interest, but can be redeemed after 1 year (with a three month 
loss of interest) For more information on savings bonds click HERE 

There are a lot of details having to do with bonds, so I think I will conclude this next week. 

That's all for this week, 

     thanks 

     Rob






RobertEBritt@yahoo.com



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