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Stocks and Bonds Essentials

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Municipal Bond

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A debt security issued by a state, municipality, or county to finance its capital expenditures, often tax-exempt.

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Floating Rate Bond

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A bond with a variable interest rate that adjusts periodically typically tied to an index such as LIBOR.

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Treasury Bond

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A government debt security with a maturity of more than 10 years that pays periodic interest until maturity, at which point the face value is paid back.

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Covered Bond

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A bond that is secured by the cash flows from mortgages or public sector loans and is covered by a pool of assets that, in case of failure of the issuer, can secure the bond.

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Government Bond

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Debt securities issued by a government to support government spending and are often considered low-risk.

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Zero-Coupon Bond

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A debt security that doesn't pay periodic interest and is instead sold at a deep discount, with the full face value repaid at maturity.

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Sovereign Bond

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A debt security issued by a national government and denominated in a foreign currency.

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Junk Bond

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A high-risk, high-interest debt security issued by a company seeking to raise capital quickly and is rated below investment grade.

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Inflation-Indexed Bond

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A government bond that is indexed to inflation in order to protect investors from a decline in the purchasing power of their money.

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Corporate Bond

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A debt security issued by a corporation and sold to investors, which is backed by the financial health and creditworthiness of the company.

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Convertible Bond

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A corporate bond that can be converted into a predetermined amount of the company's equity at certain times during its life, usually at the discretion of the bondholder.

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Common Stock

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Equity ownership in a corporation, with voting rights and dividends that are variable.

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Savings Bond

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A non-marketable, interest-bearing U.S. government bond that is designed to be a long-term investment for individuals.

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Bearer Bond

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A fixed-income security that is owned by the holder (bearer) and not registered in the issuing corporation’s books.

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Fixed Rate Bond

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A bond that pays the same amount of interest for its entire term and the interest payments do not change.

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Perpetual Bond

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A bond with no maturity date, that is not redeemable but pays a steady stream of interest forever.

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Income Bond

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A type of debt security in which only the face value of the bond is promised to be paid to the holder, while the interest payments are contingent on the issuer's profitability.

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Callable Bond

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A type of bond that allows the issuer to repay the bond before its maturity date.

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Puttable Bond

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This bond gives the holder the right to force the issuer to buy back the bond at a fixed price at specific times.

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Preferred Stock

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A class of ownership in a corporation with a fixed dividend, priority over common stock, but typically without voting rights.

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