And Interest

  

"And interest" is a reminder used by a bond salespeople when they quote the price of a bond. This little hinty phrase is deployed to inform the buyer that they will pay for the basic price of the bond, but the price will also include any accrued interest.

Let’s say you are being quoted a price of a bond at $200 “and interest,” and the bond issuer makes annual interest payments of $12. If you buy the bond in March and one quarter of the year has passed since the bond paid any interest, the accrued interest you can expect to pay for and receive is $9, nine months from now.

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Finance: What are Government Bonds?52 Views

00:00

finance a la shmoop. what are government bonds?

00:05

now we're gonna narrow this question a bit and declare these bonds to be US [hands shape the question]

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government bonds. our answer would be a tad different if we were discussing

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bonds backed by North Korea Nigeria or Egypt so US government bonds come in a

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few flavours. generally speaking they range in duration that is how long it

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takes for them to mature and the principal get paid off. short-term US

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government paper it's a fancy term for a bond ,refers to things that come due in a

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year or less. that's short-term. year or less. and then there are Treasury bills

00:37

which come in a variety of durations and our price like this note how different

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these look versus just you know buying a bond .but when you buy a bond it has a [chart shows prices]

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face amount of say a thousand bucks for what is called its par value. that piece

00:52

of paper might agree that clown shoes incorporated which is where most

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congressmen get their Footwear of course, will pay 30 bucks twice a year to the

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holder for 10 years, and then pay back the original thousand bucks invested

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it's like a normal vanilla bond, the interest rate here in this case is 6%

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per year, but many US government notes are sold at auction which means they

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sell at a discount to their par value. well regardless of how they're sold US [auction with a clown in attendance]

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government bonds are backed by what is generally perceived in the world as the

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most certain or secure financial backing. even more powerful than Google .if sorry

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Larry and Sergey we're just keeping it real. the bonds are backed specifically

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by the US government's right to tax its citizens. and oh they tax us. do they ever.

01:38

so now you can stop wondering about that bottomless hole a third or more of every

01:43

paycheck vanishes into. [portion of paycheck flies down dark hole in the ground]

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