Stock Market Game Week in Review

For those just joining the program, The Stock Market Game has recently added the trading of bonds in some states (check with your local coordinator to see if they are offered in your area). Your students (and perhaps some of you) may be interested in learning about them as a possible investment strategy in this turbulent market.

Let's start with the basics. What are bonds?

Bonds are loans investors make to the issuers in return for the promise of being paid interest, usually, but not always, at a fixed rate, over the loan term. The issuer also promises to repay the loan principal at maturity, on time and in full. Bonds have a reputation as a dull investment, in part because they are less volatile than stocks and produce a lower long-term return than stocks. But in the current economy, they have become much more attractive as an investment option.

While all bonds share basic characteristics, such as terms, rates and par values (the face value, or named value of the bond -- usually $1,000), they are not all alike. One of the major differences is that they're issued, or sold, by four distinct entities in the U.S.

Corporations issue bonds to raise money for expansion, research and development, and other expenses of doing business. While corporations can also raise money by selling new shares of stock, they may prefer bonds because the existing shares lose value when new shares are issued.

Municipal governments, such as states and cities, sell bonds to fund projects for the public good like building bridges, sewers, roads and schools.

The U.S. Treasury issues bonds to meet its regular and unusual obligations.

And finally, government agencies issue bonds to raise money to provide mortgages and student loans.

Click here to view a video discussing differences between Treasury and agencies securities.

For more information about bonds, check out our What is a Bond? lesson in the Teacher Support Center. To access the lesson, click "Lessons & Activities" (in purple), search by keyword "bonds," and make sure to select "no" after "core."

To learn more about The Stock Market Game, visit www.stockmarketgame.org.

1 What would best describe your stance heading into the coming week of trading? Bullish Bearish Neutral 2 Which of these sectors do you think is set to move up in the coming week? --Choose One--Aerospace and DefenseAirlinesAutomobilesBeverages and Food ProductsBiotechnologyCommercial BanksComputers and PeripheralsConsumer NondurablesEnergy Equipment & ServicesHMOs and HospitalsHomebuildingInsuranceIntegrated OilInternet, Software ServicesInvestment Bankers and BrokersMediaMultiline RetailPharmaceuticalsPrecious MetalsSemis, Semi EquipmentTelecom EquipmentTobacco and AlcoholWireless CommunicationsUtilities 3 Which of these sectors do you think is set to move down in the coming week? --Choose One--Aerospace and DefenseAirlinesAutomobilesBeverages and Food ProductsBiotechnologyCommercial BanksComputers and PeripheralsConsumer NondurablesEnergy Equipment & ServicesHMOs and HospitalsHomebuildingInsuranceIntegrated OilInternet, Software ServicesInvestment Bankers and BrokersMediaMultiline RetailPharmaceuticalsPrecious MetalsSemis, Semi EquipmentTelecom EquipmentTobacco and AlcoholWireless CommunicationsUtilities View the results without voting