Question

Discuss this topic in your own words:

“Bonds something most people don't purchase much anymore. During WWII and before, American citizens were large consumers of government bonds, but today, very few invest in them. They are a little more complicated that stocks and mutual funds considering the time value of money concepts involved in the annuity recurring payment and then lump sum value of the initial par value “

---- Find a bond issued by either a public company or a government entity in Moody's or Standard and Poor's. for example, you can look up Indiana Bonds and see the bonds issued for projects at Indiana University or for highway projects such as I-69. It’s interesting to see how these bonds are rated, and how they are sold to the public...the terms and conditions etc. Disney became famous several years ago for issuing a 99-year bond! People buying the bond will never see it reach maturity!

Answer 1

Bonds traditionally were considered a sound investment. However, in today's context, they are not much reliable and don't give a return that would necessarily assure them to be as useful as earlier times.

As the interest rates are determined by the government, thus they cannot be considered as meeting the required return criteria in the context of investment. Also, the return thus received after their time period expiry (maturity) might not be as good as appears to be, due to the time value of money. Thus not solving the issue of availability of sufficient funds.

Also, they have a very long time period, for maturity. Which again makes them a not so good investment for current times. Thus, nowadays people prefer other types of investment options more than bonds.