Bonds and Mutual Funds

1. Bonds and Mutual Funds Growing your Income

2. Vocabulary • Municipal Bond • Corporate Bond • Mutual Fund

3. Government Bonds Governments sell bonds to raise money for current expenses or future expenses. Bonds are a certificate that represents the promise to repay a specific amount of money at a stated interest rate on the maturity date. Municipal Bonds (Munis) Bonds issued by local and state governments Typically Exempt from federal and most state income taxes.

4. U.S. Savings Bonds For people with a smaller amounts of money to invest. Considered a very safe investment

5. Other Federal Securities Treasury Bills (T-bills) Maturity Dates range from 91 days to 1 year Treasury Notes (T-notes) Maturity Dates range from 1 year to 10 years

6. Corporate Bonds Bonds that lend money to businesses. You become a creditor for the business. Bond Components Face Value (Maturity Value) The amount that is being borrowed by the corporation. Interest Paid to the investor, usually twice a year until the bond’s maturity date.

7. Bond Values Based on changing interest rates and the credit rating/report of the borrowing corporation. Bonds prices are stated by 100s (Sold in $1,000 denominations)

8. Mutual Funds A Mutual Fund is an investment fund set up and managed by companies that receive money from many investors. The investment company then invests in different stocks and bonds. Each mutual fund focuses on different investment areas and are often categorized.

9. Mutual Fund Values Investors hold shares of the mutual fund. The value of each share is based on the Amount of investments/# shares. Income is designated in part to operating expenses and the other towards dividends or reinvested