What Is a Treasury Bond?

• Commonly called T-bonds, Treasury bonds are issued by the U.S. Treasury and offer holders fixed interest combined with the return-in-full of the bond's face, or par, value at the time of maturity. Treasury bonds are long-term (more than one year) investments with terms to maturity of up to 30 years. Interest is paid as interim, or coupon, payments at regularly-occurring intervals (usually quarterly). Upon maturity, the final interest payment is accompanied by the bond's face value (usually $1,000).
  
  

Who Can Benefit from a Treasury Bond?

• The long-term, fixed-interest nature of Treasury bonds make them ideal investments for those seeking a reliable source of passive income. Backed by the resources of the U.S. Treasury, Treasury bonds are considered risk-free investment instruments and guarantee full payment of interest and par value until maturity. For this reason, the interest yield on Treasury bonds may be used to gauge the risk associated with other bonds of similar costs and terms-to-maturity. Holders are able to sell Treasury bonds in the secondary bond market, should they feel that doing so would be in their best interest.
  
  

What Is a CD?

• CDs, or certificates of deposit, are short-term (less than one year) promissory documents issued by banks in exchange for depositing money in special savings accounts. Terms-to-maturity on CDs may range from several days to several months. CDs are sold for less than their par value (typically in the tens of thousands of dollars). Upon maturity, the holder receives the entirety of the CD's par value. The difference between the par value and amount deposited represents the interest which accrues in the interim. Once deposited, the money may not be withdrawn prior to the maturity date without the imposition of heavy penalties.
  
  

Who Can Benefit from a CD?

• For investors with a generous cash position, CDs represent a convenient way to earn money on existing resources. Though there are no interim benefits, the short-term nature of CDs renders a short turnaround with a long-term frame of reference. Moreover, a CD's depository obligation upon the holder makes them an effective method for helping to ensure short-term financial goals.