It depends on who is issuing the bond. If it is a federal bond from the US government. 0% interest and 0 risk. If it is a company that is likely to face bankruptcy or a country that can't control its spending, like Greece, then 40% and lots of risk.
You have to decide if the level of risk is worth the potential return.
Bonds, risk, an interest?
How much interest is on a bond for one year? And is there any risk? I'm curious for financial purposes
- The interest depends on the duration (term) of the bond and the risk worthiness of the organization borrowing the money. For instance a 30-year bond issued by a company that is rated as a poor risk will have a very high interest rate and a 1-year Treasury bond issued by the government will have a very low interest rate.
There are two types of risk in bonds: (1) credit risk - that the company will default and not pay the bond off, and (2) interest risk - if you buy a bond at face value ($1,000 often) and interest rates rise, your bond's value will fall because other bonds on the market are paying a better rate. As a guideline, a 1% increase in interest rate makes a 30 year bond decline in value by 12%.00
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