A bond is a loan to a company or government. When a company or government needs to raise money, it will often issue a bond. When you buy a bond, you are paid interest at regular intervals such as monthly, quarterly or annually. There are several different types of bonds:
Treasury bonds - issued by the federal government. they are available in two, five and ten year periods. The periods are when the bonds mature or the money is payed back to you.
Municipal bonds - issue by state or local governments. Interest earned is not taxed as long as you live in the state where the bond is issued.
Corporate bonds - issued by a company. Interest rates vary. Riskier companies often pay higher rates in order to get people to buy their bonds.
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