Given the tax benefits, the interest rate for tax-exempt municipal bonds is usually lower than on taxable fixed-income securities such as corporate bonds with similar maturities, credit qualities and other items. Bond investors typically seek a steady stream of income payments and, compared to stock investors, may be more risk-averse and more focused on preserving, rather than increasing, wealth. The interest may also be exempt from state and local taxes if you reside in the state where the bond is issued. Generally, the interest on municipal bonds is exempt from federal income tax.
Short-term bonds mature in one to three years, while long-term bonds won’t mature for more than a decade. By purchasing municipal bonds, you are in effect lending money to the bond issuer in exchange for a promise of regular interest payments, usually semi-annually, and the return of the original investment, or “principal.” A municipal bond’s maturity date (the date when the issuer of the bond repays the principal) may be years in the future. Municipal bonds (or “munis” for short) are debt securities issued by states, cities, counties and other governmental entities to fund day-to-day obligations and to finance capital projects such as building schools, highways or sewer systems. The Laws That Govern the Securities Industry.Researching the Federal Securities Laws Through the SEC Website.Structured Notes with Principal Protection.Smart Beta, Quant Funds and other Non- Traditional Index Funds.Mutual Funds and Exchange-Traded Funds (ETFs).Publicly Traded Business Development Companies (BDCs).Stock Purchases and Sales: Long and Short.Pay Off Credit Cards or Other High Interest Debt.Required Minimum Distribution Calculator.
Bond principal definition professional#
In exchange for this service, the principal pays a fee to the surety for as long as the surety bond is outstanding. The surety makes the payment to the obligee. Thus, the surety bond is a promise to pay the obligee if the principal does not perform under the contract. This is a third party that does not directly perform the requirements of the contract, but rather who guarantees the performance of the principal under the contract. This is the party receiving the obligation typically the counterparty to the contract with the principal.
This is the party that is supposed to perform in accordance with the requirements of a contract. A bond agreement involves the participation of the following three entities: It is commonly used to ensure that performance is completed under the terms of a contract. A surety bond is a contract, guaranteeing that a legal agreement will be completed.