Turner Broadcasting and Microsoft.

LINK IT UP

Visit this website (http://openstax.org/l/bondsecurities) to read about Treasury bonds.

A bond issued by the U.S. government or a large corporation may seem to be relatively low risk: after all, the
416 17 • Financial Markets

bond issuer has promised to make certain payments over time, and except for rare bankruptcy cases, these

payments will occur. If a corporate bond issuer fails to make the payments that it owes to its bondholders, the

bondholders can require that the company declare bankruptcy, sell off its assets, and pay them as much as it

can. Even in the case of junk bonds, a wise investor can reduce the risk by purchasing bonds from a wide range

of different companies since, even if a few firms go broke and do not pay, they are not all likely to go bankrupt.

As we noted before, bonds carry an interest rate risk. For example, imagine you decide to buy a 10-year bond
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