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What is a guaranteed bond?

A guaranteed bond is a fixed-income security where a third party, such as a government or financial institution, guarantees the repayment of the principal and interest. This added security reduces the risk for investors compared to other types of bonds that do not have a guarantor backing. What are the key features of a guaranteed bond?

Are guaranteed bonds tax deductible?

Certain types of guaranteed bonds, particularly those issued by governments, may offer tax benefits, such as exemption from federal, state, or local taxes on the interest income earned, making them more attractive to investors in higher tax brackets.

Should you invest in guaranteed bonds?

Investors should carefully weigh the advantages and disadvantages of investing in guaranteed bonds, considering factors such as lower potential returns, interest rate risk, inflation risk, and credit risk before making a decision.

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