Bonds and Treasuries

The current interest rates of US Saving Bonds are 0.2 percent for Series EE Bonds. Series I Bonds have interest rate of 1.18 percent. Series HH Bonds have interest rate of 1.5 percent.

Zero coupon bonds issued by the US Treasury are issued at a discount to face value. An investor holding zero coupon bonds is paid the full face value when the zero coupon bond matures.

The difference between the purchase price and the maturity value is know as the original issue discount which represents the interest earned on the zero coupon bond.

Although a zero coupon bond does not pay annual interest, an investor must pay taxes each year based on the imputed receipt of income. Since the investor is not receiving interest payments during the life of the bond, taxes would be paid on interest income not actually received until bond maturity. Due to the yearly tax liability on imputed interest, it makes sense for most investors to hold zero coupon bonds in a tax deferred retirement account.

The interest earned on zero coupon bonds issued by the US Treasury are exempt from state and local taxes.

A zero coupon bond is a bond which pays no interim cashflow (i.e. coupons).

We usually price on the basis of percentage of Face Value (i.e. $100).

So if you expected 5% return, semi annually, over the 3 years remaining on the life of a ZC Bond, the price would be;

100/(1+Yield/frequency)^(TermXfrequency)

100/(1+5%/2)^(3X2) = $86.23

So you'd pay $86.23 now and get $100 back in 3 years. If so, then your return would be 5% s.a.

Accrued interest is usually calculated like this: Accrued interest = face value of the bonds x coupon rate x factor. Coupon = Annual interest rate/Number of payments. Factor = time coupon is held after last payment/time between coupon payments.

U.S. Treasury bonds are an investment tool that loans money to the government, and in turn the owner of the bond may collect interest on that loan. Advantages for investing in U.S Treasury bonds are that they are exempt from state taxes, and they are guaranteed to be paid when it comes time to cash the bonds in.

The serial number on a savings bond is typically located in the lower right corner of the front side of the bond. It is a combination of letters and numbers that uniquely identifies the bond. For electronic bonds, the serial number can be found in your online account or on the bond's details page. Always ensure to keep this information secure, as it is important for tracking and redeeming the bond.

A premium savings bond is simply a bond which trades at a coupon rate that is higher than the prevailing interest rate. This increased coupon rate will cause the bond to mature faster than it otherwise would.

A corporate bond is a bond issued by a corporation for the purpose of raising funds and expanding the business. These bonds are usually long-term (i.e. at least one year) and generally offer a higher yield than some other investments. Corporate bonds carry a higher risk of default than other investments such as government bonds, depending on the given corporation and the state of the market.

You can find an overview of how Savings Bonds work online at Treasury Direct. On this website there is information on Savings Bonds including Savings Bond Calculator, Savings Bonds Wizard, Value Files and FRB Locator and more.

You can go to the US treasury website and enter the serial number from the face of the bond to look up it's current value.

You don't find it, you calculate it based upon;

1) Outstanding Maturity

2) Coupon Rate

3) Market Price

Premium bonds offer higher interest rates than bonds sold at par. However, there is a premium cost that one must pay. Don't let that deter you, as the extra interest should more than pay the premium when the bond reaches maturity. The other benefit of Premium bonds is that they are less volatile than par bonds.

Because stock is ownership, and "the people" own the government.

A Series EE savings bond with a denomination of $100 and purchased in June 1999 would currently be valued at $77.72. Since the issue price is $50 for a $100 denomination savings bond, the purchaser of a bond in 1999 has accumulated $27.72 in interest.

The interest rate on EE bonds issued in 1999 is variable and based on the yield of 5-year treasury securities. The current rate for a savings bond purchased in 1999 is only 0.63%.

An interesting feature of the E Series savings bonds purchased in 1999 is that the government guarantees that the bond will be worth its face value at 17 years. For the example discussed above, the savings bond purchased for $50 in 1999 would be worth at least $100 in 2016.

The savings bond is worth $72.00 as of July 2013.

The Present Value (value now) of a fixed cashflow, paid in the future is calculated using the following formula;

Present Value = Cashflow/(1+ yield)

As the yield rises, the PV falls.

A $50 savings bond issued in 1991, specifically a Series EE bond, typically has a maturity period of 30 years and earns interest over time. The value of the bond depends on the interest rates at the time of issue and how long it has been held. As of 2023, a 1991 $50 EE savings bond would likely be worth around $100 or more, but the exact amount can be checked using the U.S. Treasury's savings bond calculator for precise calculations.

The value of United States savings bonds can be calculated through online calculators such as the Treasury Direct calculator. This calculator requires the user to input the series, bond serial number, date issued and denomination into the calculator.

One can find a US Savings Bond Calculator online. The treasury provides websites with US Savings Bond Calculators as well as aid for one to learn about the bonds.

The Conversion Premium is the amount by which the current price of a convertible security exceeds the current market value of the stock into which it may be converted.

For example, a bond with a price of $110, convertible into 20 units of stock, trading at $5.10 (totalling $102) would have a conversion premium of $8.

When the Federal Reserve lowers interest rates, the value of outstanding bonds will increase. The increase in the value of bonds is due to the market price of the bonds adjusting to reflect the lower interest rates available on new bonds. Investors with bond holdings enjoy an increase in the value of their holdings when the Fed cuts rates. However, new investors in bonds will receive a lower rate of interest and if the Fed later raises rates, bond investors will experience a decrease in the market value of their bonds.

You want to look at companies that are solid, big, and will not be rocked by the financial tides. Smaller companies will offer higher rates in order to tempt people to go with them, but these are not accurate rates, as bonds are only as safe as the company that's offering them. For this reason, when looking for a baseline idea of the prices, you want to look at the real monoliths.

A good place to apply for a savings bond would be your local bank. They will help explain everything to you and will help you with any problems. Also you will have much easier access to your account, compared to opening one online.

"Bullet" means all of the principal (Face Value) is paid at maturity. This is the most common type and also referred to as a "Straight bond". An "Amortising bond" is one where the face value is paid back progressively over the life.

Usually, bit not always, the yield will fall (and the price rise).

However, if the issuer of the bond suffers when the economy turns down, the yield may rise (price fall).