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Bond Investments

Instructions: Use the Internet to research information on the following types of bonds:
 Corporate
 Federal Agency
 Municipal
 Treasury
You will need to include the definition and one example of each type of bond to complete the chart below. Use the following websites
to help guide your research on bond investments:

http://www.investopedia.com/articles/bonds/07/agency_bonds.asp

www.municipalbonds.com

www.treasurydirect.gov

Type of Bond Federal Agency Bonds Municipal Bond Treasury Bond

Government intertie of Issued by state and Issued by federal


Definition corporation backed by local governments. government. None
the government. Local government to little default
bond. Fund projects risk. You will have
done on a local to pay federal
level. You have to taxes on interest
pay state taxes on earned.
income, but not
federal.
Federal government City funding for a Treasury bond
Example 1 bailing out a park.
bankrupted business.

Bond Rating Agencies

Instructions: Access the website: www.municipalbonds.com/education/read/67/understanding-bond-ratings to locate the bond rating


classifications from the three different agencies (Moody’s, Standard and Poor’s, and Fitch’s. Describe (in your own words) each bond
rating classification from the website.

Moody’s Ratings Standard and Poor’s Fitch’s


Aaa Highest rating. AAA Highest rating. AAA Denotes the
Low risk. Extremely strong highest rating.
creditworthiness. Default risk
relative to all
other issuers of
obligations in the
same country.
Aa Second highest AA Very strong AA Denotes
rating. Strong creditworthiness. expectations of
creditworthiness. very low default
risk relative to
other issuers or
obligations in the
same country.
A Third highest A Strong A Denotes
rating. Average creditworthiness. expectations of
creditworthiness. low default risk
relative to other
issuers or
obligations in the
same country.
Baa Fourth highest BBB Adequate BBB Denotes a
rating. Implies creditworthiness. moderate default
average Considered the risk relative to
creditworthiness. lowest of what is other issuers or
known as an obligations in the
investment-grade same country.
bond rating.
Ba Below-average BB Regarded as BB Denotes an
creditworthiness. speculative. elevated default
risk relative to
other issuers or
obligations in the
same country.

B Weak B Regarded as B Denotes a


creditworthiness. speculative. significantly
elevated default
risk relative to
other issuers or
obligations in the
same country.
Caa Very weak CCC Regarded as CCC Denotes that
creditworthiness. speculative. default is a real
possibility.
Ca Extremely weak CC Regarded as CC Denotes that
creditworthiness. speculative. default of some
kind appears
probable.
C Weakest C Regarded as C Denotes that
creditworthiness. speculative. default is
imminent.

Bond Investments Summary:

After you have completed your research, answer the following questions:
1.) Which type of bond(s) would you choose to invest in and why? I would invest in a municipal bond because the money from it
goes into something typically local, and I would get paid back over time.
2.) Which bond rating classifications will you focus on for your investment portfolio? I would focus on at least A under Moody’s
classifications.
3.) Which rating agency would you use to help evaluate your bond investments?
I would use Moody, because I feel that I can understand it a little better than Standard and Poor and Fithch’s.