Bond Market

## What is a bond? - [x] An investment where you lend money in exchange for interest payments - [ ] A type of stock that represents ownership in a company - [ ] A mortgage on a building - [ ] A fancy type of cable TV subscription > **Explanation:** A bond is essentially an IOU from a borrower (issuer) to a lender (investor), promising to pay back the borrowed amount with interest later. ## What's typically lower-risk: bonds or stocks? - [x] Bonds - [ ] Stocks - [ ] Both are equally risky - [ ] Only corporate bonds > **Explanation:** Generally, bonds are considered less risky than stocks due to their fixed-income nature. Think of bonds as the tortoises and stocks as the hares of the investment world. 🐢🐇 ## What does "maturity" mean in the context of bonds? - [ ] A state of financial stability - [ ] The date when the bond will be repaid - [x] The time frame after which the principal is returned to the investor - [ ] A measure of how well a bond performs > **Explanation:** Maturity refers to the date on which a bond's principal amount is due to be paid back. It’s like waiting for your cookies to bake; there’s a designated time before you can indulge! 🍪 ## If interest rates rise, what happens to existing bond prices? - [x] They generally fall - [ ] They generally rise - [ ] They stay the same - [ ] They become more attractive to investors > **Explanation:** When interest rates rise, existing bonds with lower rates become less appealing, causing their prices to fall. It’s a classic case of “new is better,” like any trendy gadget! 📈📉 ## What is a coupon in terms of bonds? - [ ] A discount on groceries - [x] The periodic interest payment made to bondholders - [ ] A membership reward at a store - [ ] The price for the bond itself > **Explanation:** In bond investing, the coupon is the interest payment bondholders receive—sort of like a paycheck for your investment! 💸 ## When purchasing a bond, what do you become? - [ ] A stock owner - [x] A creditor - [ ] An employee of the issuer - [ ] A financial advisor > **Explanation:** When you purchase a bond, you become a creditor to the issuer, loaning your money in exchange for future interest payments and the return of your principal. It's like being the bank, but cooler! 🏦😎 ## Which type of bonds are typically issued by municipalities? - [ ] Corporate bonds - [ ] Government bonds - [x] Municipal bonds - [ ] Treasury bonds > **Explanation:** Municipal bonds are specifically issued by local governments or municipalities to fund projects like roads and schools. Think of it as an investment in your community! 🏙️🌳 ## What’s the primary purpose of issuing bonds? - [ ] To fluamow when stocks are on a diet - [ ] To fund new diets for millionaires - [ ] To promise breakfast in bed for all investors - [x] To raise capital for various projects and debts > **Explanation:** The primary purpose of bonds is to raise funds! (Sadly, breakfast in bed isn’t included…unfortunately.). 🥞☕️ ## Why is bond investing generally more attractive for conservative investors? - [ ] They need something to spice up their portfolios - [x] It offers more predictable returns with lower risk - [ ] They want to be part of the corporate world - [ ] Risk is overrated > **Explanation:** Conservative investors typically seek more predictable and stable returns, which bonds are known to provide! After all, who needs surprise risks when you have couch cushions and hot chocolate? 🍫🛋️ ## What happens if the issuer of a bond goes bankrupt? - [ ] Investors get priority over mortgage holders - [ ] Everything is fine, just a bit of a detour - [x] Bondholders could lose their investments, or get pennies on the dollar - [ ] No one ever knows > **Explanation:** If a bond issuer goes bankrupt, bondholders are typically among the last to be paid in bankruptcy proceedings. Just like that time when you realized your pizza was the last one in the fridge! 🍕🚫