25. Many savings programs are protected by the Federal government against loss. Which of the following is not?
a.) A U.S. Savings Bond.
b.) A certificate of deposit at the bank.
c.) A bond issued by one of the 50 States. Technically, a bond is not a savings program. First a word or two about bonds issued by states, municipalities and corporations. In there simplest form, a bond is a loan made by an investor to a borrower who, as a condition of the agreement, usually pays an agreed upon amount of interest, paid regularly to the investor. That is, as I said, a very simplistic explanation of the process.
The only insurance you have that you will get paid lies with the agency that rated the bond issuer based on ability to pay the money back over time with interest and the fact that, should anything happen to the bond issuer, such as bankruptcy, the bondholder will be first in line to receive payment although not in full before any other party with investment interest such as owners of stock. Choices a and b carry the full faith and credit of the federal government while choice b is covered by the Federal Deposit Insurance Corporation or FDIC.
d.) A U. S. Treasury Bond.
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