Can you answer sb’s question about Bonds?:

Suppose interest rates on Treasury bonds rose from 5 to 9 % as a result of higher interest rates in Europe. What effect would this have on the price of an average company’s common stock and why?

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Can you answer nikko’s question about Bonds?:

Im in school right now to be a dental assistant, and I already own my home. I want the last of my money to grow without risking losing it in stocks or high yield investments. I have considered cd’s but they tie it up for a year and I only get 5%.

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s of the income you earn you should think about the use of a high interest savings account to safely store your extra funds and make your money grow. It’s a fact that many people leave their excess money in their main bank account that does not earn interest. Storing money in a non-interest earning account is a wasted opportunity and you can multiply you money over time through the use of a high interest savings product.

A high interest savings account generally yields an interest rate greater than 2.5%. Most of the high interest products offering the most competitive interest rates and online savings accounts such as HSBC and ING Direct.

Why Interest Matters

Larger capital growth occurs with a high interest savings account because you will receive interest on the principle amount of money that you put away into a savings account. The principle, combined with the interest that you earn on that principle, continues to build on itself - with little-to-no maintenance on your part.

For example, if you put away $10,000 into a high interest savings account, such as an online savings account, with an annual interest rate of 4.0%, you will have accrued $400 by the end of the year without having to lift a finger. By the end of the second year, you will have earned more than $800 - just for keeping your money in the high interest account.

The passive income that you receive from your high interest account can help you achieve financial security and build your nest egg … without the need for you to take up another job or working all the overtime you can get.

Rate of Inflation While earning passive income from your savings seems like a strategic way to, basically, earn money for doing nothing, keep in mind that there is a national rate of inflation, which is usually about 3% per year.

The rate of inflation is based upon the average increase in prices which therefore causes the real value of the dollar to fall. Therefore, if your money is tied into a high interest account that returns 4% interest a year, you have to subtract this rate of inflation in order to understand exactly how much your money is actually growing.

Types of High Interest Accounts

There are two popular types of high interest accounts that you may want to consider: money market accounts and CDs.

A money market account is directly linked to the Stock Market and is not guaranteed. As the market falls, so can your interest rate. However, because it is tied to the Stock Market, you can also lose your principle when you invest it into a money market. PayPal provides one of the most competitive money market accounts currently available online. A certificate of deposit (or CD for short) is a very stable high interest account with a fixed term and return. It is often available through online savings banks such as ING. When you put your money into a CDD you have to decide an initial period of time for the investment such as twelve months. During the agreed period your funds will grow according to the interest rate agreed. However, there may be penalties if you wish to remove your money before the period of time has expired.

There are a number of new online banks entering the market with names that may not be familiar to you so be sure to check out the company before handing over any money. One of the easiest methods is to do a search on the Better Business Bureau website and look for any claims filed against the company. Once you’re comfortable with your selection of accounts, start putting that money away to watch it grow!



Thanks to Richard Greenwood for contributing this article to our Bonds blog:

Us Savings Bond Interest

A savings bond is a treasury security for investors. In essence, investors are loaning the government money. They are issued both as paper bonds and electronic savings bonds. They cannot be traded but can be redeemed after only one year. There are no dividends, per se, with a savings bond, as the interest payments are simply added on to the value of the bond, but as tax-deferred items, the interest doesn’t have to be reported to the government until the bonds are cashed.

The value of a savings bond varies with the kind of bond purchased - series A, B, C, D, E, EE, F, G, H, HH, I, J and K. It also depends on when it is cashed and what kind of interest it has been assigned. Since 1935, the treasury has issued savings bonds in alphabetical progression. For example, series A bonds were offered the first year, Series B bonds followed in 1936, Series C ran from 1937-1938, and Series D were issued from 1939-1941. Series E bonds, longest running of the treasury savings bonds, ran from May 1941 until they were discontinued in 1980.

Series EE bonds were brought out in 1980 to replace the series E. They can be purchased at half or full face value. They come in amounts between $50-$10,000, and carry a maturity date of between eight to thirty years. Those cashed in before the fifth year are penalized three months’ worth of interest. If EE bonds are purchased through a bank or other financial institution, it is also known as a Patriot Bond. There were more kinds of savings bonds, including the series F and G (which were offered to all investors except banks), series H, HH, Series I, J and K.

How do we calculate the value?

The value of a savings bond can be calculated by taking note of the face value of the bond, the interest rate from the time the bond was issued until the present time, and whether there are any penalties that have to be deducted. In addition, it is important to note that a bond that is issued at half the face value will be worth the face value at maturity, while a bond that is issued at face value is worth twice this amount at the time of maturity. Savings Bonds can also increase in value if they are redeemed past their maturity date, in which case the interest must be calculated on a year-to-year basis.



Thanks to Mike Singh for contributing this article to our Bonds blog:

Cashing In Savings Bonds

Can you answer Jeet’s question about Bonds?:

Risk premiums on corporate bonds are usually anti cyclical that is, they decrease during business cycle expansions and increase during recessions.

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