CHAPTER 10
Zero Investment 쏆쏆쏆쏆쏆쏆쏆쏆쏆쏆쏆쏆쏆쏆쏆쏆쏆쏆쏆쏆쏆쏆쏆쏆쏆쏆
“Dig a well before you are thirsty.”
Do I Need to Read This Chapter? • Do I need to save money toward a particular life event in the future, such as college tuition for my child? • Am I aware of zero coupon bonds? • Can I balance a predictable, long-term investment with a certain degree of risk? • Am I interested in an investment with tax-deferred features? s there an instrument that lets you know exactly how much money you will have at a particular future date (whether it be for your child’s education, your retirement, etc.) and, if administered correctly, becomes tax deferred or even tax exempt?
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As you will see in the following pages, zero coupon bonds have some definite advantages over other types of long-term investments. They have become a good choice for pension funds and for a child’s college savings. They are therefore an ideal investment for those of you who are more concerned about “outcome” than “income.”
How Does the Zero Coupon Bond Work? Bonds are debt obligations issued by a corporation or by a federal, state, or local government agency. When you buy a bond (usually at face value), you are
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