Friday, June 29, 2007

Differentiating notes and bills

Often when investors and Web sites talk about bonds, they’re
referring to instruments technically and correctly called notes
and bills. You’ll see these terms on the Web, and knowing
what they mean is important.

Bonds, notes, and bills are called fixed-income securities
because the amount of income you earn is predetermined.
Whether a fixed-income security is a bond, note, or bill
depends solely upon its maturity date. The distinctions are
as follows:

n Bonds: The maturity date is more than ten years from
the issue date.

n Notes: The maturity date is between one and ten years
from the date of issue.

n Bills: The maturity date is within one year from the issue
date.

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