Bond Question?/ C/D Question?

Question

I bank at bank of america and they let me know this one day they are doing 5.19 APR Bond or bond i forget for 10 months fo $5000 and a 4.90% bond for liquid 10 month cd for $5000 Now what does this mean?..... Does this mean i give them 5,000 and 10 months later they give me 250 at the end of the year??? or do i have to pay taxes to that money or does it mean other fees and cost or...???

Answer 1

Bond - You would purchase the bond. What your bank is telling you is that for the time period specified in the terms of the bond, you will not have access to the money, therefore, the money invested in the bond is considered a "non-liquid asset" for the duration of time specified by your bank (example - a 1 year bond).

The idea behind a bond is to earn a higher rate of return on your money than you could earn if your money was just sitting in your bank account. At the end of the time period specified by your bank, you can cash in your bond. The first day that you can cash in your bond is called the "maturity date" (example - 1 year later).

When you cash in your bond on its maturity date, you should expect to get the original $5,000 that you invested, PLUS the amount of money that equals the APR that the bond was supposed to pay. APR stands for "annual percentage rate," which means the percentage you will earn on your $5,000 over the period of time that you own the bond (example - in 1 year).

Once you cash in your bond, and you get all the money coming to you, you now have cash. Cash is considered a "liquid asset", which means it can be immediately used to buy goods or services.

The term CD stands for "certificate of deposit." This is yet another type of investment in which you get involved with in order to get a higher rate of return on your money than you would if the money was just sitting in your bank account. When you purchase the CD, you are giving the bank the use of your money for a specified period of time. Typical time periods for CDs are 6 months, 1 year, 2 year..etc.

The longer period of time for the CDs, the higher rate of return they pay. Like the bond, CDs have a maturity date, so during the period of time that you own the CD, your money is tied up in a "non-liquid asset," meaning, something of value that cannot be immediately converted into cash in your hand.

Unlike the case of the bond, with a CD, if you end up having an urgent need for the money that you have invested in the CD, you can cash it in before the maturity date by paying a penalty to do so. Your bank can inform you how much this would be...just ask your representative.

When you buy a bond, you are investing in something that is not guaranteed by the U.S. government, so there is some risk of losing all or part of your investment (although based upon your description, it is highly unlikely that this would happen). When you purchase a CD, your money is guaranteed by the FDIC, which is an agency of the U.S. government (FDIC stands for Federal Depositors Insurance Corporation).

Last but not least, when it is time to file your tax return, you are required to show the interest, or gains that you made on your money, as the gain is considered income...and you are supposed to report all your income, from all sources. On your tax form, there is a line that asks about how much interest you earned. You simply fill in the blank.

If you don't want to pay tax on interest income, then go back to your bank and ask them what kinds of tax deferred investments they have. This is a whole other story, but the short version is that you can invest in a long term retirement account, such as a 401k account, that is not taxed on a year by year basis.

I hope you are now better able to understand what the bank representative was telling you.

Regards,
the Rambler

Answer 2

In regard to the 5.19% , 10 month CD, on $5000 you would earn $216. That $216 is taxable , assuming you have enough other income to require paying income tax. The bank will send you a statement at the end of the year for tax purposes. At the end of the ten months, you will receive your $5000 plus the $216 interest. There should not be any other fees, costs, etc.

Answer 3

The perspective that is accurate for 5.19 APR on a 10 month CD or bond would compute like this:

0.0519 x (principal, what you leave deposited with them) x
(10/12)

So for a $5000 CD with a 5.19% APR maturing in 10 months you'd receive 5216.25 (give or take a few cents) after 10 months. You report the $216.25 on schedule B and it's fully taxable (unless you've bought a tax exempt issue) and reported to you on a 1099, usually in the first January after maturity.

Answer 4

that is widely used because the (kinetic) isotope result. The (absolute) power at which a C-H bond breaks is an same because the flexibility at which a C-D bond breaks. notwithstanding, the flexibility that the bond already has is more advantageous contained when it comes to deuterium, making the flexibility required to break a C-D bond decrease. that is via 0-aspect power: the flexibility of a harmonic ocillator (a strong approximation to a bond at low energies) is given by technique of: E=(ok/m)^a million/2 (v+a million/2) the position v is the vibrational state, ok is a continuing and m is the decreased mass. v = 0,a million,2,3... m = m1m2/(m1+m2) m = 12/13 for H and 12/7 for D therefore the flexibility is sqrt(13/7)~=a million.4 cases larger for D than H. The quantization contained in the equation (v is restricted to 0,a million,2,3..) signifies that the bottom conceivable power is: E=(a million/2)(ok/m)^a million/2 that is the 0 aspect power and the vibrational floor state of the molecule. that is what differs between the molecules. The decreased mass would not change that a lot for isotopes of aspects except hydrogen, therefore this result isn't that major/dominant else the position.