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Government bonds are usually simple, low-risk investments. The state and local tax exemption, as well as the federal exemption for tuition payment, make some bonds especially advantageous for investors in high tax brackets or those with children heading to college. Government bonds are very liquid. However, government bonds usually have a very ...
A bond is an agreement between an investor and the company, government, or government agency that issues the bond. When investors buy a bond, they are loaning money to the issuer in exchange for interest and the return of principal at maturity. Because bonds traditionally pay the investor a fixed interest rate periodically, they are also known ...
Corporate bonds aren’t generally safer than government bonds, certificates of deposit, or most municipal bonds. That’s because corporations are more likely to default on their obligations than the US government, local governments, and banks. This added risk means that corporate bonds typically offer higher returns than these instruments.
Default risk is perhaps one of the most fundamental types of risk. After all, it represents the chance the investor will lose his or her investment. All bonds, except for those issued by the U.S. government, carry some level of default risk. This is one reason corporate bonds almost always have higher coupons than government bonds.
The purchaser of a municipal bond is effectively loaning money to a government entity, which will make a predetermined number of interest and principal payments to the purchaser. Issuers typically use municipal bond proceeds to finance day-to-day operating activities or capital expenditures for the public good such as road, hospital, school, or ...
General obligations bonds are usually a safe investment because of the pledge of the local government's taxing authority. For the investor, however, it is important to know the extent of the general obligation debts outstanding and the track record of the taxing authority in collecting taxes, executing liens, and paying its bond holders.
T-Bonds are backed by the full faith and credit of the U.S. government. For this reason, T-Bonds are generally considered risk-free investments. Due to their lack of default risk and extremely high level of liquidity, Treasuries usually offer the lowest yields of bonds with similar maturities and are considered benchmarks of the fixed income ...
For example, EE Bonds issued before November 1982 earn interest at the higher of a guaranteed or a market-based rate. Bonds issued between November 1982 and February 1983 offered a guaranteed rate for an initial number of years and then carried a variable market-based rate thereafter. Bonds issued from March 1993 to April 1995 only have 18-year ...
Gilts are the British equivalent of U.S. Treasury securities. Like Treasurys, some are indexed to inflation. Large financial institutions are the largest purchasers. Gilts are bonds issued by the British government. Issued in 100-pound units and representing a loan to the gov't, the bonds promise income over a fixed….
Savings bonds are bonds sold by the U.S. Treasury. They are used to raise money from the public to fund its operations and administer the economy. When the government sells bonds, it is essentially taking a loan from the public, which it guarantees to repay at some point in the future. The U.S. Treasury has issued many different series of ...