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Bonds...represent a loan an investor makes to a corporation or government. The issuing entity promises to repay the loan as well as regular, usually semi-annual, interest payments until maturity. Bonds are graded as to safety by several well known firms, e.g. Standard and Poor's. The prices of all bonds move up or down in opposite reaction to moves in the interest rate environment. For example, an increase in the general level of interest rates will push down the market value of bonds. Conversely, a drop in interest rates is accompanied by a rise in the market value of bonds. As stocks are bought for growth, bonds are bought for income.
BRIMMER FINANCIAL |