Bond traders are hip. They’ve got their own lingo to make sure you think they’re cooler than the guys selling insurance. And nothing’s as hip as saying the words “Class 3-6 Bonds” while you’re trying to impress the interns after trading hours at Applebee’s.
There are six grades of bonds based on risk and likelihood of default. Those grades are classified by the National Association of Insurance Commissioners (those guys are cooler, and hang out at Chili’s). Class 1 and 2 bonds are considered investment grade. Everything else is non-investment grade.
Class 3 is less risky than Class 4. Class 6 is on the verge of default, so you might just want to save your money.
Call them crap if you want, but we’ll just say that they’re "riskier investments"...so that we can still hang out at Applebee’s.
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Finance: What are Bonds?393 Views
Finance a la shmoop what is a bond? well a bond is your word your promise your [Women shake hands]
handshake your John Hancock on a contracted piece of paper your mortgage
your credit card debt yeah their bonds to your "I swear I'm not a deadbeat"
declaration... that's your bond right well bonds come [Man lying on a sofa]
in many complex flavors and compositions simply put bonds are loans aka debt you
borrow money or you promise or you you bond that
you'll pay it back when you borrow money the amount you borrow is called the
principal you pay rent on that amount borrowed and that rent is called [rent appears at bank]
interest to the entity loaning you the money that interest is called yield
thank you very much for the yield like if the lender rents you a grand for a
year and you pay them a thousand 80 bucks at year-end paying back the
principal and then the rent on the money while the lender will have had a yield [Yield of lender appears]
of 8% on the grand that they loaned you so that's a bond you borrow money you
pay it back and if you don't the person who loaned you the dough well they [Person stamped with property of shmoop bank]
generally own your tuchus and yeah you know what Shakespeare said about bonds
yeah that's what he said so if you don't really know what you're doing don't do
it...
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