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savings bonds          (about 62 slides)
First, some              2
BONDS• A bond is an I.O.U.• Get it? ―I owe you‖                        3
A bond is an agreement that states that:  – one person (or company, or government)  – will pay someone else  – a certain a...
Some bonds look like a check, don’t they?                                            5
Some bonds look like a certificate, don’t they?                                             6
Most bonds are not physicalpaper like cash anymore.                              7
Bonds are justelectronicrecordsnowadays (likemoney in yourbank)                 8
You give the Verizon Corporation $1,000 and they give you their 1-year, 5% corporate bond.                                ...
• You give the Verizon Corporation $1,000  and they give you their 1-year, 5%  corporate bond.                            ...
• You give the Verizon Corporation $1,000  and they give you their 1-year, 5%  corporate bond.  – 5% of $1000 is $50—you w...
After six months, Verizon sends you $25                                          12
After one year, Verizon sends you another  $25 plus your original $1000 back                                            13
• A bond is like a loan.• If you lend money to  someone (or a company  or a government) they  pay you the money back  late...
“Issue” a BondThe person (or  company or  government) who  promises to pay later  ―issues‖ the bond.        Issued by the ...
“Issue” a BondTo ―issue‖ a bond  means to ―send it out‖        Issued by the  Federal Government                          ...
“Issue” a Bond• Typical ―issuers‖ are:   – the Federal Government    Washington, D.C.                              USA   17
“Issue” a Bond• Typical ―issuers‖ are:   – a State (like the state     of California)                                18
“Issue” a Bond• Typical ―issuers‖ are:   – a County or a City      (like the City of Elk Grove)                           ...
“Issue” a Bond• Typical ―issuers‖ are:   – a Corporation (like Disney or Kellogg’s)                                       ...
“Issue” a BondTypical ―issuers‖ are:    Hospitals    Airports    School Districts    Sports Stadiums    Government Agencie...
Review:           typical bond issuers are•   The Federal Government•   State Governments•   Counties or Cities•   Corpora...
Why issue a bond?• Issuers need money.• Maybe they want to build a highway or a prison                                    ...
Why issue a bond?• Issuers need money.• Maybe they want to build a factory or buy a  fleet of new trucks.                 ...
Why issue a bond?• Issuers need money.• Or maybe they want to  build a high-rise  apartment building.                     ...
Why issue a bond?• Issuers need money.• Issuers sell bonds (borrow the money) and pay  the interest back with the profit t...
Let’s start withSavings Bonds                   27
Savings Bonds are issued by the     Federal Government                                  28
These oldbonds are       Savings bonds are sold in a ―Series‖obsolete—they are notsold anymore:Series ASeries BSeries CSer...
Today, savings bonds are issued in             only two types:                             Series I bonds                 ...
The FederalBuy a Savings Bond    Government                     lets any local                          bank sell         ...
Buy a Savings Bond               buy on-line         www.treasurydirect.gov                              32
At the teller window…• You will make a withdrawal from your checking  or savings account (or give the teller cash)• The te...
No charge (no “load”)• Banks cannot charge  you any fee for selling  or for cashing in  (―redeeming‖) a  savings bond.• Sa...
Savings Bonds are safe• You cannot lose  money when you buy  a savings bond.• The U.S. Government  guarantees that you  wi...
Savings Bonds are safe• Registered in your name• Replaced if lost, stolen,  or destroyed• Only you can cash in  your savin...
Savings Bonds are safe• It makes no difference  who physically holds a  savings bond.• The owner of the bond is  the perso...
Earn interest every month• Savings bonds earn  (―accrue‖) interest  every month.• You accrue interest  every single month,...
Redeeming TimelineBuy    1 year                   5 years                30 yearsbond Cannot      Redeem with             ...
Tax on Savings Bond interest              • Interest earned on a                Federal Savings Bond                is exe...
Exception to having to pay   Federal Income Tax             Interest earned is               excluded from               F...
U.S. Savings Bonds• Savings Bonds today come in two types:     Series I     Series EE                                     ...
Let’s start with  Series EESavings Bonds                   43
Since 2001, paper EE bonds are    called ―Patriot Bonds‖                      Since 2001                      Before 2001,...
Series EE paper Savings Bonds are purchased for half of their face value  Pay only    ½ price for Series EE• You pay only ...
Pay only                price for Series EEYou pay only $50 for a paper $100 Series EE savings bond                       ...
Paper EE bonds (from banks) are  sold in these denominations:          $50      Electronic EE bonds          $75          ...
Fixed Interest Rate• Interest on Series EE  savings bonds is fixed     Series EE bonds  for the life of the bond      issu...
Series EE accrued interestInterest accrues (is added to the bond’s value  for redemption calculations) on     the first bu...
S    M    T    W    T    F    S   Buy near theMARCH 28    1   2    3    4    5    6    end of the       7    8   9    10  ...
S    M    T    W    T    F    S      If you buy any day                                           during the month,MARCH 2...
S    M    T    W    T    F    S    Don’t wait until the                                         end of the month. ItMARCH ...
S    M    T    W    T    F    S   Buy near theMARCH 28    1   2    3    4    5    6    end of the       7    8   9    10  ...
Series EE Compound interestInterest compounds (is added to the bond’s  value for interest rate calculations) twice a  year...
Series I Savings BondsSeries I savings bonds are exactly like Series EE  savings bonds with only two exceptions…          ...
Pay Full    Face Value for Series IYou pay $100 for a $100 Series I savings bond                    =                     ...
Series I Savings Bond Interest• The interest rate on an Series I savings bond is  not fixed like the Series EE savings bon...
Series I Savings Bond Interest• Series I bonds sold between Nov 1, 2011  and Apr 30, 2011 earn 0.74%     Fixed part: 0%   ...
Everything else is the same• No redemption in first year.• 3-month interest penalty if redeemed  between 1 and 5 years.• S...
Learn all about savings bonds at:www.treasurydirect.gov                                63
---end of presentation---                            64
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Savings bonds

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Basics of savings bonds for high school students

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  • Frames with faded pictures and text(Intermediate)To reproduce the picture effects on this slide, do the following:On the Home tab, in the Slides group, click Layout, and then click Blank.On the Insert tab, in the Illustrations group, click Picture. In the Insert Picture dialog box, select a picture and then click Insert. Select the picture. Under Picture Tools, on the Format tab, in the bottom right corner of the Size group, click the Size and Position dialog box launcher.In the Size and Position dialog box, on the Size tab, resize or crop the picture as needed so that under Size and rotate, the Height box is set to 3” and the Width box is set to 3”. Resize the picture under Size and rotate by entering values into the Height and Width boxes. Crop the picture under Crop from by entering values into the Left, Right, Top, and Bottom boxes. 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  • Transcript of "Savings bonds"

    1. 1. savings bonds (about 62 slides)
    2. 2. First, some 2
    3. 3. BONDS• A bond is an I.O.U.• Get it? ―I owe you‖ 3
    4. 4. A bond is an agreement that states that: – one person (or company, or government) – will pay someone else – a certain amount of money – on a certain date. 4
    5. 5. Some bonds look like a check, don’t they? 5
    6. 6. Some bonds look like a certificate, don’t they? 6
    7. 7. Most bonds are not physicalpaper like cash anymore. 7
    8. 8. Bonds are justelectronicrecordsnowadays (likemoney in yourbank) 8
    9. 9. You give the Verizon Corporation $1,000 and they give you their 1-year, 5% corporate bond. 9
    10. 10. • You give the Verizon Corporation $1,000 and they give you their 1-year, 5% corporate bond. 10
    11. 11. • You give the Verizon Corporation $1,000 and they give you their 1-year, 5% corporate bond. – 5% of $1000 is $50—you will earn $50 over the next year. 11
    12. 12. After six months, Verizon sends you $25 12
    13. 13. After one year, Verizon sends you another $25 plus your original $1000 back 13
    14. 14. • A bond is like a loan.• If you lend money to someone (or a company or a government) they pay you the money back later—and they pay you interest too. 14
    15. 15. “Issue” a BondThe person (or company or government) who promises to pay later ―issues‖ the bond. Issued by the Federal Government 15
    16. 16. “Issue” a BondTo ―issue‖ a bond means to ―send it out‖ Issued by the Federal Government 16
    17. 17. “Issue” a Bond• Typical ―issuers‖ are: – the Federal Government Washington, D.C. USA 17
    18. 18. “Issue” a Bond• Typical ―issuers‖ are: – a State (like the state of California) 18
    19. 19. “Issue” a Bond• Typical ―issuers‖ are: – a County or a City (like the City of Elk Grove) 19
    20. 20. “Issue” a Bond• Typical ―issuers‖ are: – a Corporation (like Disney or Kellogg’s) 20
    21. 21. “Issue” a BondTypical ―issuers‖ are: Hospitals Airports School Districts Sports Stadiums Government Agencies 21
    22. 22. Review: typical bond issuers are• The Federal Government• State Governments• Counties or Cities• Corporations• Nearly any large organization that needs money 22
    23. 23. Why issue a bond?• Issuers need money.• Maybe they want to build a highway or a prison 23
    24. 24. Why issue a bond?• Issuers need money.• Maybe they want to build a factory or buy a fleet of new trucks. 24
    25. 25. Why issue a bond?• Issuers need money.• Or maybe they want to build a high-rise apartment building. 25
    26. 26. Why issue a bond?• Issuers need money.• Issuers sell bonds (borrow the money) and pay the interest back with the profit they make later. 26
    27. 27. Let’s start withSavings Bonds 27
    28. 28. Savings Bonds are issued by the Federal Government 28
    29. 29. These oldbonds are Savings bonds are sold in a ―Series‖obsolete—they are notsold anymore:Series ASeries BSeries CSeries DSeries ESeries FSeries GSeries HSeries HHSeries JSeries K 29
    30. 30. Today, savings bonds are issued in only two types: Series I bonds are nicknamed ―Inflation‖ bondsSeries EE bondsare nicknamed―Patriot‖ bonds 30
    31. 31. The FederalBuy a Savings Bond Government lets any local bank sell savings bonds for them. Just walk right up to the teller window. 31
    32. 32. Buy a Savings Bond buy on-line www.treasurydirect.gov 32
    33. 33. At the teller window…• You will make a withdrawal from your checking or savings account (or give the teller cash)• The teller will verify your name and address• The teller will ask if you want anyone listed as a co-owner or as a beneficiary.• The teller will send an order to the Federal government telling them to mail your savings bond to your house.• The teller will give you a copy of the bond order and a receipt for the money you spent.• The Federal government will mail you your paper savings bond within 15 days. 33
    34. 34. No charge (no “load”)• Banks cannot charge you any fee for selling or for cashing in (―redeeming‖) a savings bond.• Savings bonds are ―no load‖ 34
    35. 35. Savings Bonds are safe• You cannot lose money when you buy a savings bond.• The U.S. Government guarantees that you will get your money back with interest.• ―full faith and credit‖ of the U.S. Government. 35
    36. 36. Savings Bonds are safe• Registered in your name• Replaced if lost, stolen, or destroyed• Only you can cash in your savings bond• Non-marketable (you cannot sell a savings It’s got your name on it! bond to anyone else, Your bond is ―registered‖ to you. you can only cash it in) 36
    37. 37. Savings Bonds are safe• It makes no difference who physically holds a savings bond.• The owner of the bond is the person in whose name it is registered, like a car. Never buy a bond from• You can’t cross out your an individual—you will not be the owner. name and put someone else’s name on it. 37
    38. 38. Earn interest every month• Savings bonds earn (―accrue‖) interest every month.• You accrue interest every single month, but you do not receive any interest money until you redeem (―cash in‖) your bond. 38
    39. 39. Redeeming TimelineBuy 1 year 5 years 30 yearsbond Cannot Redeem with Redeem Redeem 3-month interest without penalty penalty Exception: ―Disaster Relief‖ 39
    40. 40. Tax on Savings Bond interest • Interest earned on a Federal Savings Bond is exempt from state income tax. • Earn interest every month but don’t pay Federal income tax on that income until bond is redeemed. 40
    41. 41. Exception to having to pay Federal Income Tax Interest earned is excluded from Federal income tax, if the bond interest is used to finance college education. 41
    42. 42. U.S. Savings Bonds• Savings Bonds today come in two types: Series I Series EE 42
    43. 43. Let’s start with Series EESavings Bonds 43
    44. 44. Since 2001, paper EE bonds are called ―Patriot Bonds‖ Since 2001 Before 2001, just called EE bonds 44
    45. 45. Series EE paper Savings Bonds are purchased for half of their face value Pay only ½ price for Series EE• You pay only $25 for a $50 EE savings bond• You pay only $50 for a $100 EE savings bond• You pay only $250 for a $500 EE savings bond 45
    46. 46. Pay only price for Series EEYou pay only $50 for a paper $100 Series EE savings bond = 46
    47. 47. Paper EE bonds (from banks) are sold in these denominations: $50 Electronic EE bonds $75 from $100 treasurydirect.gov $200 are sold in any amount $500 (to the penny) from $25 to $30,000 and $1,000 are sold at face value $5,000 (pay $50 for a $50 $10,000 electronic EE bond) 47
    48. 48. Fixed Interest Rate• Interest on Series EE savings bonds is fixed Series EE bonds for the life of the bond issued from (30 years) Nov 1, 2010• The interest rate for to Apr 30, 2011 new bonds is set every earn May 1 and Nov 1. 0.60% 50
    49. 49. Series EE accrued interestInterest accrues (is added to the bond’s value for redemption calculations) on the first business day of each month. 51
    50. 50. S M T W T F S Buy near theMARCH 28 1 2 3 4 5 6 end of the 7 8 9 10 11 12 13 month 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 1 2 3 Interest day!APRIL 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Redeem near 25 26 27 28 29 30 1 the beginning of the month 52
    51. 51. S M T W T F S If you buy any day during the month,MARCH 28 1 2 3 4 5 6 you will get the same 7 8 9 10 11 12 13 monthly interest on interest day 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 1 2 3 Interest day!APRIL 4 5 6 7 8 9 10 11 12 13 14 15 16 17 If you redeem any day 18 19 20 21 22 23 24 during the month, you 25 26 27 28 29 30 1 will get the same interest. 53
    52. 52. S M T W T F S Don’t wait until the end of the month. ItMARCH 28 1 2 3 4 5 6 will take the Federal 7 8 9 10 11 12 13 Government a few days to register your 14 15 16 17 18 19 20 bond. 21 22 23 24 25 26 27 28 29 30 31 1 2 3 Interest day!APRIL 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 1 54
    53. 53. S M T W T F S Buy near theMARCH 28 1 2 3 4 5 6 end of the 7 8 9 10 11 12 13 month 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 1 2 3 Interest day!APRIL 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Redeem near 25 26 27 28 29 30 1 the beginning of the month 55
    54. 54. Series EE Compound interestInterest compounds (is added to the bond’s value for interest rate calculations) twice a year—six months after the bond is issued and every six months after that. 56
    55. 55. Series I Savings BondsSeries I savings bonds are exactly like Series EE savings bonds with only two exceptions… 57
    56. 56. Pay Full Face Value for Series IYou pay $100 for a $100 Series I savings bond = 58
    57. 57. Series I Savings Bond Interest• The interest rate on an Series I savings bond is not fixed like the Series EE savings bond is.• The interest rate on an Series I savings bond is made up of two parts: – a fixed part that cannot change for the life of the bond (30 years) – a variable part tied to the current inflation rate• If inflation goes up, the interest rate of the variable part goes up too. Rates are adjusted every May 1 and November 1. 59
    58. 58. Series I Savings Bond Interest• Series I bonds sold between Nov 1, 2011 and Apr 30, 2011 earn 0.74% Fixed part: 0% Variable part: 0.74%• Percentages are set every May 1 and Nov 1• For new bonds, both parts are set• For old bonds, only the variable part is set 60
    59. 59. Everything else is the same• No redemption in first year.• 3-month interest penalty if redeemed between 1 and 5 years.• Stop earning interest after 30 years.• Interest accrues on the first business day of every month.• Interest compounded every six months.• No state income tax on interest earned• No Federal income tax if used for college 62
    60. 60. Learn all about savings bonds at:www.treasurydirect.gov 63
    61. 61. ---end of presentation--- 64
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