Bonds

Bonds have a fixed face value and trade at par when the current price matches the face value. When the current price of a bond is more than the face value, it is called a premium. A $1,000 face value bond selling for $1,200, for example, is trading at a premium. Discount bonds, on the […]

Federal income from state, city, and local government bonds (municipal bonds, or munis) is normally tax-free. However, you must record this income when you file your taxes. In most cases, municipal bond income is tax-free in the state where the bond was issued. However, take in mind the following: Occasionally, a state that normally taxes

State and municipal taxes are not levied on Series I savings bonds. You won’t have to pay state or local taxes on the interest income you earn if you invest in Series I savings bonds. That means you’ll have more money in your pocket at the end of the year than if you owned a

Bond mutual funds typically generate consistent income from a diverse portfolio of securities. As a result, the income tax rate is determined by the securities held by the fund. Furthermore, because fund managers buy and sell bonds on a regular basis, there may be capital gains and losses. Bond funds distribute interest and capital gains

A bond’s price might change in the secondary market. The yield, current interest rates, and the bond’s rating are the most important aspects that influence the price of a bond. The present value of a bond’s cash flows, which are equal to the principal amount plus all remaining coupons, is the yield. In the secondary

Stocks provide ownership of a company as well as a share of any cash dividends (‘Dividends’). Bonds allow you to participate in lending to a business but do not give you ownership. Instead, the buyer of a Bond receives periodic payments of Interest and Principal. What’s the difference between stocks and corporate bonds? Stocks and

Bond price quotes are expressed as a percentage of the bond’s par value, which is transformed to a numeric number and then multiplied by 10 to calculate the cost per bond. Bond prices can be stated as fractions as well. Why is it that bonds are quoted in 32nds? Because the market is broader and

Bond ratings are assigned letters ranging from “AAA” to “D,” with “AAA” being the highest and “D” being the lowest. Different rating systems employ the same letter grades but differentiate themselves by using different combinations of upper- and lower-case letters and modifiers. What factors go into determining a bond’s rating? When generating a rating score

Bond issuers are often examined by their own set of rating organizations to gauge their creditworthiness, just as people have their own credit report and rating published by credit bureaus. Moody’s, Standard & Poor’s, and Fitch are the three main rating organizations that assess the creditworthiness of bonds. Their assessment of the issuer’s creditworthiness—in other

Simply defined, those who purchase such bonds are lending money to the issuer for a set length of time. How does a bond get repaid? A bond is just a debt that a firm takes out. Rather than going to a bank, the company obtains funds from investors who purchase its bonds. The corporation pays