A

finance a la shmoop. what are government bonds?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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