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Interest Rate Treasury Bond

There are many ways to invest your money. Some chose to simply put their money in a savings account, where very little interest is accumulated. Other choose to buy stocks , or mutual funds, which pay higher dividends but come with greater risks,. Another safer way to invest it to purchase government bonds.

A government bond is simply a debt fund. Investors purchase the bonds where the money is used to run the government or for other government programs. In turn the purchaser is entitled to receiving a predetermined interest rate. A government bond is simply an IOU. They promise to pay the investor back with interest for a certain amount of years. This a safer way to invest your money with little or no risk at all.

Government bonds have two types of interest rates. One is called the "fixed rate" The fixed rate is announced and determined each May and November bye the Secretary of the Treasury. This rate remains in affect for the life of the bond. It also applies to all bonds within the sis month period of the time of the announcement. The fixed rate is always equal to, or greater then zero percent.

The second type of interest rate is called the "Inflation Rate". This rate is also determined every May, and November, just like the flat rate, also by the Secretary of the Treasury. The inflation rate is based on the current market conditions, and economic conditions. The inflation rate is used in conjunction with the flat interest rate to determine the exact interest rate for the bond, for the next six months

In some cases the inflation rate may be a negative number because of strong market conditions. Negative inflation rates are used the same as inflation rates. However if the negative number is so high that it offsets the fixed rate, the interest rate will not be less the previous six months. This is to protect the bond holders so they still accumulate some interest. The bond rates change every six months no matter what type of bond you invest in. No matter what the market conditions are Savings bonds have always been a good and safe way to invest you money, with little or no risk,.

Discuss It!||| said:

No matter what the market conditions are Savings bonds have always been a good and safe way to invest you money, with little or no risk,.

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