Skip to main content
FLC
Start Learning
Back to the lesson plan

Prints on letter paper. Turn off headers and footers in your print settings for the cleanest copy.

Financial Literacy Club

learnwithflc.org

NameDatePeriod

Investing · Lesson 3

Bonds

Part A. Vocabulary

Define each term in your own words.

Credit risk

Part B. Guided notes

Fill in each blank using the word bank.

Word bank: borrowers · existing · interest · ownership

  1. Bond = a loan you make. Stock = .
  2. Coupon rate × face value = yearly .
  3. Riskier pay higher interest.
  4. When rates rise, bond prices fall.

Part C. Check your understanding

Circle the best answer.

  1. You buy a $1,000 bond with a 5% coupon.

    1. How much interest do you receive each year?

    • A. $5
    • B. $500
    • C. $50
    • D. $105

  2. Interest rates rise sharply after you buy a bond.

    2. What happens to your bond's price if you try to sell it early?

    • A. It usually falls, because new bonds pay more.
    • B. It rises, because rates went up.
    • C. Nothing — bond prices never change.
    • D. It doubles.

  3. 3. Corporate bonds usually pay higher interest than U.S. Treasury bonds because companies are more likely to default.

    True/False

Part D. Apply it

Show your work.

  1. 1. A $1,000 bond pays a 5% coupon. How much interest does it pay each year? Over a 10-year term?

  2. 2. Interest rates rise and new bonds pay more. What happens to the price of an existing lower-rate bond, and why?

Part E. Think about it

Answer in complete sentences.

  1. 1. Why would anyone buy a bond instead of a stock?

  2. 2. How is buying a bond similar to a bank lending you money?

Exit ticket

Name

Fill in: A bond is a ___ you make. A stock is ___.