Lesson plan · Investing · Lesson 3
Bonds
Lending money to governments and companies in exchange for interest.
- 45 minutes
- Grades 9–12
- Intermediate
- Activity: whole class
Objectives
Students will be able to:
- Explain a bond as a loan made by the investor
- Calculate yearly interest from a coupon rate and face value
- Explain why existing bond prices fall when interest rates rise
Materials
- Slide deck and a projector
- Worksheet (one per student)
- Exit ticket slips (bottom of the worksheet)
Standards
- National Standards for Personal Financial Education (2021)
- Investing
- Texas TEKS §113.76 Personal Financial Literacy and Economics
- (8) The student understands the importance of saving and investing in creating wealth and building assets.
Topic-level alignment by FLC. How we map standards
Key vocabulary
- Credit risk
- The chance the borrower can't pay you back. Riskier borrowers have to offer higher interest to attract lenders.
Background reading
The official sources this lesson is based on.
- Bonds — FAQs (opens in a new tab) · investor.gov
- Treasury Bills (opens in a new tab) · treasurydirect.gov
- Savings Bonds (opens in a new tab) · treasurydirect.gov
45-minute agenda
0–5 min
Warm-up
Post: “Would you lend $100 to a friend who always pays you back, or to a stranger? What would you charge each one?”
Teacher note: Riskier borrowers must pay more to borrow — the same is true for bond issuers.
5–17 min
Direct instruction
Present the lesson slides. Make sure students leave with these points:
- Bond = a loan you make. Stock = ownership.
- Coupon rate × face value = yearly interest.
- Riskier borrowers pay higher interest.
- When rates rise, existing bond prices fall.
Use the “See it” slide (How a bond works) to make the idea visual.
17–22 min
Worked example
Walk through “Leo's 10-year bond” on the slides. Pause before the result and ask students to predict it.
22–32 min
Bond Auction
Format: whole class · 10 minutes
- Three borrowers each want to sell a $1,000, 5-year bond: the U.S. Treasury, a large, stable company, and a brand-new startup.
- Students write the yearly interest rate they would demand from each; collect and post the class averages.
- Twist: interest rates rise and new bonds now pay 6%. Would anyone pay full price for an old bond paying 4%?
- Discuss what happens to the old bond's price.
What to look for: The class usually demands the least from the Treasury and the most from the startup — that's credit risk. When new bonds pay 6%, an old 4% bond is worth less, so its price falls.
32–37 min
Check for understanding
Use the question slides — or run them as a Four Corners game. Questions:
- How much interest do you receive each year?
- What happens to your bond's price if you try to sell it early?
- Corporate bonds usually pay higher interest than U.S. Treasury bonds because companies are more likely to default.
37–42 min
Discussion
- Why would anyone buy a bond instead of a stock?
- How is buying a bond similar to a bank lending you money?
42–45 min
Exit ticket
Prompt: Fill in: A bond is a ___ you make. A stock is ___.
Differentiation
Common misconception
“Bonds can't lose value.” Their prices move with interest rates, and a borrower can fail to pay.
Support
Show the loan picture: you → $1,000 → borrower; borrower → yearly interest → you; face value back at maturity.
Extension
Explain in your own words why a bond's price and interest rates move in opposite directions, using a numeric example.
Homework or make-up work
Students can complete the full interactive lesson — including its knowledge check — at learnwithflc.org/courses/investing/bonds. No account needed; progress saves on their device.