Analysis of U.S. Savings Bonds
DOI:
https://doi.org/10.1016/1057-0810(95)90017-9Abstract
U.S. savings bonds are complex contracts. Financial pianners have traditionally paid littie attention to savings bonds, in part because they often offer below-market interest rates. However, they sometimes offer above-market interest rates, especially when one learns how to view and value their option features. All savings bonds contain put options that protect the investor against a rise in interest rates. Thus, they can be viewed as short-term, intermediate-term, or long-term bonds. The EE bonds also offer several tax options. We show how savings bonds can be used to beat the kiddie tax. to finance postsecondary education, and in retirement planning.
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