Is it bad to redeem Savings Bonds early?
April 6, 2009 by How Savings Bonds Work
Filed under More Bonds Answers
Can you answer richardyarnell’s question about Bonds?:
I have two US Savings Bonds (EE Series). The final maturity date is in 2023. Would it be bad to redeem them now?
Buy Savings Bonds Online
I have two US Savings Bonds (EE Series). The final maturity date is in 2023. Would it be bad to redeem them now?
Buy Savings Bonds Online
Personal Finance 12 - Understand the Special Features of Bonds
March 1, 2009 by How Savings Bonds Work
Filed under About Bonds
As we mentioned in previous article, we know that our government only represents about 30% of our retirement income, the company retirement pension plan offers another 30 % and many of us do not have one. It is up to individuals to invest wisely short and long term in order to make up for the short fall if he or she would like to live comfortably after retirement without giving up some retirement plans. In this article, we will discuss the special features of bonds and debentures.
1. Callable bonds
a) Callable bonds means the bond issuers can recall the bond before the maturity date.
b) All Bonds are assumed to be non-callable, unless otherwise stated in the prospective when bonds are issued.
c) Like other bonds, investors wanting to sell a callable bond must find a buyer or wait until the maturity date.
2. Convertible bonds
Some bonds give bondholders the option of exchanging the security for a specified number of common shares of the company allowing the investors of a debt security the possibility of capital gain.
3. Retractable bonds
Retractable bonds permit the holder to shorten the maturity date are called retractable bonds.
4. Floating Rate
floating rate means that the bond interest rate changes according to the current government treasury bill rate.
5. Fluctuation of prices
a) Even though, When a bond is issued, the interest rate is fixed for the entire term but changing economic interest rates create some fluctuation of prices
Example:
The bond price is lower with interest rate of 5%, if other more recently issued debt securities are near 10%.
b) If interest rates have fallen since this bond was issued, it can be sold for a price greater than par at a premium.
6. Yield to maturity
a) Yield of the bonds mean the annual return from an investment expressed as a % of its market price
b) At maturity, holder of the bond receive the face value of the bond regardless of the price paid for it.
c) If there are accrued interest owing on a bond, but not yet paid than bonds are sold at a certain price, plus accrued interest.
7. Commission for bond selling
a) Commission is not charged on bonds, instead, the dealers add their profit to the buying or selling price known as spread.
Example:
$1,000 bond may be sold to a broker for $965, or purchased for $980. The broker makes $15 for purchasing and selling the same bond. The $15 is a spread.
I hope this information will help. If you need more information, you can read the complete series of the above subject at my home page:
http://lifeanddisabitityinsuranceunderwriter.blogspot.com/
http://financialinvesting09.blogspot.com/
http://medicaladvisorjournals.blogspot.com
Thanks to Kyle J. Norton for contributing this article to our Bonds blog:
1. Callable bonds
a) Callable bonds means the bond issuers can recall the bond before the maturity date.
b) All Bonds are assumed to be non-callable, unless otherwise stated in the prospective when bonds are issued.
c) Like other bonds, investors wanting to sell a callable bond must find a buyer or wait until the maturity date.
2. Convertible bonds
Some bonds give bondholders the option of exchanging the security for a specified number of common shares of the company allowing the investors of a debt security the possibility of capital gain.
3. Retractable bonds
Retractable bonds permit the holder to shorten the maturity date are called retractable bonds.
4. Floating Rate
floating rate means that the bond interest rate changes according to the current government treasury bill rate.
5. Fluctuation of prices
a) Even though, When a bond is issued, the interest rate is fixed for the entire term but changing economic interest rates create some fluctuation of prices
Example:
The bond price is lower with interest rate of 5%, if other more recently issued debt securities are near 10%.
b) If interest rates have fallen since this bond was issued, it can be sold for a price greater than par at a premium.
6. Yield to maturity
a) Yield of the bonds mean the annual return from an investment expressed as a % of its market price
b) At maturity, holder of the bond receive the face value of the bond regardless of the price paid for it.
c) If there are accrued interest owing on a bond, but not yet paid than bonds are sold at a certain price, plus accrued interest.
7. Commission for bond selling
a) Commission is not charged on bonds, instead, the dealers add their profit to the buying or selling price known as spread.
Example:
$1,000 bond may be sold to a broker for $965, or purchased for $980. The broker makes $15 for purchasing and selling the same bond. The $15 is a spread.
I hope this information will help. If you need more information, you can read the complete series of the above subject at my home page:
http://lifeanddisabitityinsuranceunderwriter.blogspot.com/
http://financialinvesting09.blogspot.com/
http://medicaladvisorjournals.blogspot.com
Thanks to Kyle J. Norton for contributing this article to our Bonds blog:
All rights reserved. Any reproducing of this article must have all the links intact.
“Let Take Care Your Health, Your Health Will Take Care You” Kyle J. Norton
I have been studying natural remedies for disease prevention for over 20 years and working as a financial consultant since 1990. Master degree in Mathematics, teaching and tutoring math at colleges and universities before joining insurance industries.
Treasury Investments/Securities - Treasury Bills, Notes, Bonds, Savings Bonds, TIPS And STRIPS
February 26, 2009 by How Savings Bonds Work
Filed under About Bonds
Treasury investments, or securities, are bonds issued by the Department of Treasury. In basic concept, they are the many different forms of loans that the people of the U.S. give to the government. There are four types of treasury securities:
1. Treasury bills or T-bills: these are securities that have a length of maturity that is less than one year (13, 26 or 52 weeks). Therefore, they are offered in a discounted form. Instead of offering interest along with the repayment amount, purchasers are offered more money at the time of maturity than they paid for the bill to begin with.
2. Treasury notes: This kind of security has a longer maturity date of 2, 5, or ten years, and they are sold in $1,000 increments.
3. Treasury bonds: With a long maturity date of 10-30 years, these securities can be helpful for investors who need to build a long-term strategy. Treasury bonds in paper form can be converted to electronic form.
4. Savings bonds: These securities differ from others in that they are registered to one person only and therefore cannot be actively traded. Also, they are the most affordable kind of treasury investment, as investors can purchase them for as low as $25.
What are the not-so-popular kinds of treasury investments?
In addition to these kinds of treasury investments or securities, the government also sells Patriot bonds, and STRIPS (Separate Trading of Registered Interest and Principal Securities). These investments separate the interest and principal parts of the security; they have the structure of a T-bill and mature between 1-30 years after issuance.
They are also the stripped version of TIPS (Treasury Inflation-Protected Securities). As zero coupon bonds, they do not pay interest payments. I Bonds and TIPS complete the wide variety of Treasury Investments. These bonds are purported to keep up with inflation, with the interest rate or principal balance adjusting with the nation’s economy.
What are the advantages of investing in the treasury securities?
Except for savings bonds, each of these is traded extensively on the market and can be easily converted to cash. They are backed by the Federal government and are usually considered low or no-risk investments. The interest on these “loans” is not taxable on the local or state level.
These securities are registered. This simply means that when these are purchased, the name that these are registered to is the sole owner. So, if you lose them these can easily be replaced if misplaced.
How can somebody invest in savings bonds?
In the past savings bonds were issued on paper. Since October 2002, the US treasury went high-tech and started to offer an online service TreasuryDirect. So, these purchases can be made online at your convenience.
Thanks to Mike Singh for contributing this article to our Bonds blog:
1. Treasury bills or T-bills: these are securities that have a length of maturity that is less than one year (13, 26 or 52 weeks). Therefore, they are offered in a discounted form. Instead of offering interest along with the repayment amount, purchasers are offered more money at the time of maturity than they paid for the bill to begin with.
2. Treasury notes: This kind of security has a longer maturity date of 2, 5, or ten years, and they are sold in $1,000 increments.
3. Treasury bonds: With a long maturity date of 10-30 years, these securities can be helpful for investors who need to build a long-term strategy. Treasury bonds in paper form can be converted to electronic form.
4. Savings bonds: These securities differ from others in that they are registered to one person only and therefore cannot be actively traded. Also, they are the most affordable kind of treasury investment, as investors can purchase them for as low as $25.
What are the not-so-popular kinds of treasury investments?
In addition to these kinds of treasury investments or securities, the government also sells Patriot bonds, and STRIPS (Separate Trading of Registered Interest and Principal Securities). These investments separate the interest and principal parts of the security; they have the structure of a T-bill and mature between 1-30 years after issuance.
They are also the stripped version of TIPS (Treasury Inflation-Protected Securities). As zero coupon bonds, they do not pay interest payments. I Bonds and TIPS complete the wide variety of Treasury Investments. These bonds are purported to keep up with inflation, with the interest rate or principal balance adjusting with the nation’s economy.
What are the advantages of investing in the treasury securities?
Except for savings bonds, each of these is traded extensively on the market and can be easily converted to cash. They are backed by the Federal government and are usually considered low or no-risk investments. The interest on these “loans” is not taxable on the local or state level.
These securities are registered. This simply means that when these are purchased, the name that these are registered to is the sole owner. So, if you lose them these can easily be replaced if misplaced.
How can somebody invest in savings bonds?
In the past savings bonds were issued on paper. Since October 2002, the US treasury went high-tech and started to offer an online service TreasuryDirect. So, these purchases can be made online at your convenience.
Thanks to Mike Singh for contributing this article to our Bonds blog:
On http://www.bond-trading.org/ you will find articles on tax exempt bond funds and canadian savings bonds.
Introduction to Bonds
February 16, 2009 by How Savings Bonds Work
Filed under About Bonds
If you are relatively new to investing, you probably have heard of stocks, but know absolutely nothing about bonds. They do not offer the same sex appeal as stocks. Movies such as Wall Street and Boiler Room have gotten many neophyte investors excited about the stock market, and not once are bonds even mentioned in these films. Bonds are somewhat perplexing; the terminology is a little confusing. This article will hopefully help you understand how bonds work and whether or not they sound like an appropriate investment vehicle for you.
Simply put, corporations, governments, and municipalities borrow money by issuing bonds for sale to the general public. Companies sometimes need additional monies to expand their business, while governments need money for infrastructure. And just like any other loan, the bondholders are paid an interest rate on their money. And, generally speaking, at the end of a certain term, the borrower has to pay back the face amount of that loan.
Interest payments are made at a predetermined rate and schedule. The interest rate is usually referred to as a coupon. The date on which the borrower has to pay back the principal is known as the maturity date. If the lender holds the bond until maturity, he or she will get their principal back. So, for example, if you lend a company $10,000 by purchasing a corporate bond, and it pays an 8% coupon and has a maturity date of 10 years from now, that means you will be paid $800 per year for the next 10 years, and then you will get back the entire initial investment on the maturity date.
Bonds are considered debt instruments, whereas stocks are equity. The reason why stocks represent equity, or ownership, in a corporation, is because stockholders are entitled to receive a portion of the earnings in a corporation, whereas bondholders are only entitled to receive interest payments on their loan. If the bond issuer goes bankrupt, bondholders have a higher claim on the assets derived from the liquidation of the company; stockholders are compensated only after everyone else if a company goes belly up, and sometimes get nothing at all.
There are basically 3 different types of bonds. Government bonds are issued by the federal government, and are considered the safest as is the debt of any country with economic stability. Municipal bonds are issued by local governments, and are also considered safe. More importantly, municipals are exempted from federal tax and often from state taxes as well, making them a very lucrative investment. Finally, there are corporate bonds, which can be risky, depending on the financial condition of the company that is doing the issue.
I hope this information has helped you become familiar with bonds. Try to set aside some money for investing and start while you are still young. The earlier you begin, the more money you can potentially make down the road. Carefully research the credit rating of the company when investing in corporate bonds, and go for municipals or government issues if looking for security.
Thanks to Jim Pretin for contributing this article to our Bonds blog:
Simply put, corporations, governments, and municipalities borrow money by issuing bonds for sale to the general public. Companies sometimes need additional monies to expand their business, while governments need money for infrastructure. And just like any other loan, the bondholders are paid an interest rate on their money. And, generally speaking, at the end of a certain term, the borrower has to pay back the face amount of that loan.
Interest payments are made at a predetermined rate and schedule. The interest rate is usually referred to as a coupon. The date on which the borrower has to pay back the principal is known as the maturity date. If the lender holds the bond until maturity, he or she will get their principal back. So, for example, if you lend a company $10,000 by purchasing a corporate bond, and it pays an 8% coupon and has a maturity date of 10 years from now, that means you will be paid $800 per year for the next 10 years, and then you will get back the entire initial investment on the maturity date.
Bonds are considered debt instruments, whereas stocks are equity. The reason why stocks represent equity, or ownership, in a corporation, is because stockholders are entitled to receive a portion of the earnings in a corporation, whereas bondholders are only entitled to receive interest payments on their loan. If the bond issuer goes bankrupt, bondholders have a higher claim on the assets derived from the liquidation of the company; stockholders are compensated only after everyone else if a company goes belly up, and sometimes get nothing at all.
There are basically 3 different types of bonds. Government bonds are issued by the federal government, and are considered the safest as is the debt of any country with economic stability. Municipal bonds are issued by local governments, and are also considered safe. More importantly, municipals are exempted from federal tax and often from state taxes as well, making them a very lucrative investment. Finally, there are corporate bonds, which can be risky, depending on the financial condition of the company that is doing the issue.
I hope this information has helped you become familiar with bonds. Try to set aside some money for investing and start while you are still young. The earlier you begin, the more money you can potentially make down the road. Carefully research the credit rating of the company when investing in corporate bonds, and go for municipals or government issues if looking for security.
Thanks to Jim Pretin for contributing this article to our Bonds blog:
Jim Pretin is the owner of http://www.forms4free.com, a service that helps programmers make email forms.
