An explanation with an example would be greatly appreciated. Thank you 🙂
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You loan the government money for a period of time and they pay interest. Bonds are the primary way the government borrows money, issuing bonds that investors buy… these are often referred to as T-bills, T-notes, etc. and are what the government debt is comprised of. Most are bought by institutional investors like pension funds, mutual funds.
But there are also savings bonds, which are more consumer-oriented bonds. Instead of paying the interest twice a year you pay a price up front and then at the maturity date you get the face value. When I was a kid it was like the initial cost was half the face value, and it took 7 years to mature… so a $50 face value savings bond was bought for $25 and grew to $50 in 7 years. Not sure the specifics these days.
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