Bonds 101

by Minority Fortune

Question: So, what are bonds?

Answer: You can look at bonds as a loan that you give to a business or government enterprise. When large enterprises are looking for large bondcertificatesamounts of money for a project, they opt for bonds.

Bonds carry little risk. However, they serve as great investments in a volatile market. They provide fixed interest payments on a predetermined term and return the initial loan amount upon its maturity, which also varies.

Even Fortune 500 companies prefer storing their extra funds in bonds for their higher interest rates. It’s because they offer better rates than traditional bank CDs, checking/ savings, and money market accounts. They’re something you might want to consider for storing away excess cash.

Example: Say you invest in a $1000 bond for a two-year period. Let’s say the terms were to earn 4% annual interest with a payout per six months. You’d receive two annual payments of $20, for a total of $40 per year. At the end of the two years, you’d get the initial $1,000 back.

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