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finance a la shmoop. what are government bonds?

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now we're gonna narrow this question a bit and declare these bonds to be US [hands shape the question]

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government bonds. our answer would be a tad different if we were discussing

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bonds backed by North Korea Nigeria or Egypt so US government bonds come in a

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few flavours. generally speaking they range in duration that is how long it

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takes for them to mature and the principal get paid off. short-term US

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government paper it's a fancy term for a bond ,refers to things that come due in a

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year or less. that's short-term. year or less. and then there are Treasury bills

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which come in a variety of durations and our price like this note how different

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these look versus just you know buying a bond .but when you buy a bond it has a [chart shows prices]

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face amount of say a thousand bucks for what is called its par value. that piece

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of paper might agree that clown shoes incorporated which is where most

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congressmen get their Footwear of course, will pay 30 bucks twice a year to the

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holder for 10 years, and then pay back the original thousand bucks invested

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it's like a normal vanilla bond, the interest rate here in this case is 6%

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per year, but many US government notes are sold at auction which means they

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sell at a discount to their par value. well regardless of how they're sold US [auction with a clown in attendance]

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government bonds are backed by what is generally perceived in the world as the

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most certain or secure financial backing. even more powerful than Google .if sorry

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Larry and Sergey we're just keeping it real. the bonds are backed specifically

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by the US government's right to tax its citizens. and oh they tax us. do they ever.

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so now you can stop wondering about that bottomless hole a third or more of every

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paycheck vanishes into. [portion of paycheck flies down dark hole in the ground]

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