Government Bond
Categories: Bonds
What are government bonds? We’re going to narrow this question a bit and declare these bonds to be U.S. Government bonds.
Our answer would be a tad different if we were discussing bonds backed by North Korea, Nigeria, or Egypt.
U.S. Government bonds come in a few flavors. Generally speaking, they range in duration. Short-term US government paper refers to things that come due in a year or less. Then there are Treasury Bills, which come in a variety of durations. When you buy a bond, it has a face amount of, say, $1,000 for what is called its par value. That piece of paper might agree that Clown Shoes Incorporated (which is where most congressmen get their footwear, of course) will pay $30 twice a year to the holder for 10 years, and then pay back the original $1,000 invested.
The interest rate here is 6% per year. But many U.S. Government notes are sold at auction, which means they sell at a discount to their par value. Regardless of how they're sold, U.S. Government bonds are backed by what is generally perceived as the most certain or secure financial backer in the world, even more powerful than Google.
The bonds are backed specifically by the U.S. Government’s right to tax its citizens. So now you can stop wondering about that bottomless hole that a third of every paycheck vanishes into.
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Finance: What are Government Bonds?52 Views
finance a la shmoop. what are government bonds?
now we're gonna narrow this question a bit and declare these bonds to be US [hands shape the question]
government bonds. our answer would be a tad different if we were discussing
bonds backed by North Korea Nigeria or Egypt so US government bonds come in a
few flavours. generally speaking they range in duration that is how long it
takes for them to mature and the principal get paid off. short-term US
government paper it's a fancy term for a bond ,refers to things that come due in a
year or less. that's short-term. year or less. and then there are Treasury bills
which come in a variety of durations and our price like this note how different
these look versus just you know buying a bond .but when you buy a bond it has a [chart shows prices]
face amount of say a thousand bucks for what is called its par value. that piece
of paper might agree that clown shoes incorporated which is where most
congressmen get their Footwear of course, will pay 30 bucks twice a year to the
holder for 10 years, and then pay back the original thousand bucks invested
it's like a normal vanilla bond, the interest rate here in this case is 6%
per year, but many US government notes are sold at auction which means they
sell at a discount to their par value. well regardless of how they're sold US [auction with a clown in attendance]
government bonds are backed by what is generally perceived in the world as the
most certain or secure financial backing. even more powerful than Google .if sorry
Larry and Sergey we're just keeping it real. the bonds are backed specifically
by the US government's right to tax its citizens. and oh they tax us. do they ever.
so now you can stop wondering about that bottomless hole a third or more of every
paycheck vanishes into. [portion of paycheck flies down dark hole in the ground]