Chapter 7

Debt Securities: Corporate and U.S. Government Loans

IN THIS CHAPTER

Bullet Understanding the specifics on bonds

Bullet Examining securities issued by the U.S. government

Bullet Looking at short-term bonds

Instead of giving up a portion of their company (via stock certificates), corporations can borrow money from investors by selling bonds. Local governments (through municipal bonds) and the U.S. government also issue bonds. For SIE exam purposes, most bonds are considered safer than stocks.

Bondholders aren’t owners of a company like stockholders are; they’re creditors. Bondholders lend money to an institution for a fixed period of time and receive interest for doing so. This arrangement allows the institution to borrow money on its terms (with its chosen maturity date, scheduled interest payments, interest rate, and so on), which it can’t do by borrowing from a lending institution.

The SIE exam tests you on your ability to understand the different types of bonds issued, terminology, and yes, some math. This chapter has you covered in topics relating to corporate and U.S. government debt securities.

Tackling Bond Terms, Types, and Traits

Before you delve deeper into bonds, make sure you ...

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