Essay on Savings Bonds

Submitted By lpatterson37
Words: 1120
Pages: 5

Introduction to Corporate Finance:
The Types of Savings Bonds

LaTasha T. Patterson

FINC390-1204A-06, Introduction to Corporate Finance
Phase 1 Individual Project
Instructor: Timothy Fischer
October 15, 2012

A savings bond is considered a debt safekeeping that the U.S. Treasury department provides for the lending needs of the United States. Unites States savings bonds are thought as one of the securest assets they are backed by the governments credit (Savings Bond, 2012). Savings bonds are different from other financial securities in many different ways. Savings bonds are profitable which means that you can’t buy them and then resale them (Savings Bonds, 2012). The benefit of taxes that is connected with savings bonds is very significant. Like with many securities, they are excused from state and local taxes, but in this case the taxes on the savings bond maybe postponed until you cash the bond.
Series EE savings bond are an appreciation type savings security. This particular savings bond can be sold for the amount you purchased it. For example, you purchase a one hundred dollar bond you can cash it in for that same amount of one hundred dollars (Savings Bonds:Series EE U.S. Savings Bonds, 2012). The interest on the bond us electronically put in your account you designated. Series EE bonds are a type of bond that is guaranteed to double in value over a certain amount of time over a period of twenty years (Definition of 'Series EE Bond', 2012). Most series EE bonds have a total interest that goes as far as the original date of maturity from the time it was issued (Definition of 'Series EE Bond', 2012).
A series E savings bond is a type of savings bond that accumulates at a five percent face amount (Definition of 'Series E Bond, 2012). When you purchase a series E bond the taxes on that bond has to be reported for Federal income purposes or if the maturity on that bond is reached. An I bond is a type of bond that once it is invested you can take your money out whenever you need it. I bonds are used by different companies, states and U.S. and foreign governments to finance many different projects and activities (What is an I Bond?, 2010). An I bond is also known as an inflation linked savings bond.
The savings bond that I would invest in is the series I bond. Why because a series I bond can be exchanged for face value. For example, $500 will get $500 back. I feel with this particular savings bond you are not losing anything that you put in. The Advantages and Disadvantages of U.S. Savings I have put the advantages and disadvantages into a chart below Type of bond | Advantages | Disadvantages | Series EE Bond | Series EE bonds are purchased at face value for half of the price so that you can invest with small amounts (Advantages and Disadvantages of Series EE and I Bond, 2006). | The proceeds of the savings bond that are not used for the person that is qualified (Advantages and Disadvantages of Series EE and I Bond, 2006). | Series I Bond | Savings bonds are backed by the federal government, which means the rate of return is supported as well (Advantages and Disadvantages of Series EE and I Bond, 2006) | The maximum annual purchase allowed is ten thousand dollars for I bonds (Advantages and Disadvantages of Series EE and I Bond, 2006). |

Saving notes are accumulation type and are savings securities that are issued in connection with the series E bonds (Definition of Savings Note, 2012). These notes are also called Freedom Shares (Definition of Savings Note, 2012). They have a period of maturity for about four years and six months and an interest of earnings over thirty years. They were obtained on a discount basis at a percentage of face value in certain monetary denominations of 100, 50, 75 and 25 (Definition of Savings Note, 2012). Below I have created a chart showing my findings.

Chart for an EE bond, I bond and E bond and savings Note

Series | Denomination Amount | Issue Date | Next Accrual