A longtime banking executive, Colin Robertson advises clients on fixed income investments at Northern Trust in Chicago. From his Chicago office, Colin Robertson often advises clients about purchasing bonds.

1. A BRIEF SUMMARY
OFTHE DIFFERENT
TYPES OF BONDS
AVAILABLE
Colin Robertson

2. Introduction
■ A longtime banking executive, Colin Robertson advises clients on fixed
income investments at NorthernTrust in Chicago. From his Chicago office,
Colin Robertson often advises clients about purchasing bonds.
Although trading bonds can be a complex process, the principle behind
them is simple. A bond is a debt, an obligation of a company to repay
loaned money on a specific schedule. Businesses and governments use
them to raise capital in amounts larger than banks will lend.
To that effect, investors in bonds become lenders.The value of the bond
consists of two parts: the principal, which is the amount of money lent,
and the coupon, which is the interest paid at a predetermined rate.When
the bond is paid off, the interest payments are returned to the investor as
profit. Listed below are three types of bonds in which people typically
invest.

3. Bonds
■ 1. Government bonds. Nations issue these bonds to start new projects
and meet expenses. Bonds with a maturity of less than one year are called
T-bills. So-calledT-notes have maturates of one to 10 years and treasury
bonds are in effect for longer periods. State or federal taxes are
sometimes applied to interest payments.
2. Municipal bonds.Various entities below the state level issue these to
supplement tax dollars.They are useful for funding public works projects,
such as schools and airport. Federal taxes are not charged for the interest.
3. Corporate bonds. Set up by businesses to meet expenses, corporate
bonds have a higher return, but are also more risky. Additionally, investors
pay federal taxes the interest. Purchasers of these bonds should
investigate the likelihood of the company to stay in business.