Celestila Moonn, a UMB intern at SchoolStreet, Inc., made the following statement: Bond markets are markets in which bonds are issued and traded. By purchasing either the U.S. Treasury Bonds or Greek Government Bonds, I can lend money to the U.S. Treasury or Greek Government. Since bonds are amortized security, I do not have to wait until maturity to get interest payments and the principal amount back from the Greek Government. So there is no default risk. Discuss whether Moonn is correct with respect to the Greek Government bonds and amortized security.

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In general, bonds may be defined as long-term debt obligations, the original issue maturities of which are greater than one year. As fixed-income securities, bonds represent loans made to government and corporate borrowers to raise their funds and support long-term capital needs, for instance, capital expenditure projects.

In return, bond issuers are responsible for paying a specified amount at the bond’s maturity plus coupon interest semiannually. Bonds’ major types include treasury notes and bonds, municipal bonds, and corporate bonds.

Celestila Moonn knows about different types of bonds and their characteristics. However, she mixes them in her statement. She supposes that Greek Government Bonds are amortized security, free from default risk, and the principal amount and interest are paid before maturity.

First of all, as previously mentioned, while coupon interest is paid twice a year, the principal amount is returned back at the bond’s maturity. In addition, Moonn describes treasury bonds that differ from municipal bonds. It is treasury bonds that “are backed by the full faith and credit of the U.S. government and are, therefore, default risk-free.” In turn, the rates of interest for treasury bonds are relatively low.

At the same time, Greek Government Bonds belong to municipal bonds issued by local or state governments. The majority of government and corporate bonds are non-amortizing as the principal is paid at issue maturity. In addition, “municipal bonds do not default risk-free,” and borrowers’ payments strongly depend on economic stability.

Thus, if defaults caused by economic crises increase dramatically, states and municipalities may declare bankruptcy or announce that they are forced to suspend payments on their debts, including unsecured bonds. Thus, considering the fact that the economy of Greece has already faced major defaults, lending money to the Greek government cannot be regarded as an appropriate decision.

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Academic.Tips. (2023) 'Celestila Moonn, a UMB intern at SchoolStreet, Inc., made the following statement: Bond markets are markets in which bonds are issued and traded. By purchasing either the U.S. Treasury Bonds or Greek Government Bonds, I can lend money to the U.S. Treasury or Greek Government. Since bonds are amortized security, I do not have to wait until maturity to get interest payments and the principal amount back from the Greek Government. So there is no default risk. Discuss whether Moonn is correct with respect to the Greek Government bonds and amortized security'. 15 March.

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Academic.Tips. (2023, March 15). Celestila Moonn, a UMB intern at SchoolStreet, Inc., made the following statement: Bond markets are markets in which bonds are issued and traded. By purchasing either the U.S. Treasury Bonds or Greek Government Bonds, I can lend money to the U.S. Treasury or Greek Government. Since bonds are amortized security, I do not have to wait until maturity to get interest payments and the principal amount back from the Greek Government. So there is no default risk. Discuss whether Moonn is correct with respect to the Greek Government bonds and amortized security. https://academic.tips/question/celestila-moonn-a-umb-intern-at-schoolstreet-inc-made-the-following-statement-bond-markets-are-markets-in-which-bonds-are-issued-and-traded-by-purchasing-either-the-u-s-treasury-bonds-or-greek/

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Academic.Tips. 2023. "Celestila Moonn, a UMB intern at SchoolStreet, Inc., made the following statement: Bond markets are markets in which bonds are issued and traded. By purchasing either the U.S. Treasury Bonds or Greek Government Bonds, I can lend money to the U.S. Treasury or Greek Government. Since bonds are amortized security, I do not have to wait until maturity to get interest payments and the principal amount back from the Greek Government. So there is no default risk. Discuss whether Moonn is correct with respect to the Greek Government bonds and amortized security." March 15, 2023. https://academic.tips/question/celestila-moonn-a-umb-intern-at-schoolstreet-inc-made-the-following-statement-bond-markets-are-markets-in-which-bonds-are-issued-and-traded-by-purchasing-either-the-u-s-treasury-bonds-or-greek/.

1. Academic.Tips. "Celestila Moonn, a UMB intern at SchoolStreet, Inc., made the following statement: Bond markets are markets in which bonds are issued and traded. By purchasing either the U.S. Treasury Bonds or Greek Government Bonds, I can lend money to the U.S. Treasury or Greek Government. Since bonds are amortized security, I do not have to wait until maturity to get interest payments and the principal amount back from the Greek Government. So there is no default risk. Discuss whether Moonn is correct with respect to the Greek Government bonds and amortized security." March 15, 2023. https://academic.tips/question/celestila-moonn-a-umb-intern-at-schoolstreet-inc-made-the-following-statement-bond-markets-are-markets-in-which-bonds-are-issued-and-traded-by-purchasing-either-the-u-s-treasury-bonds-or-greek/.

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Academic.Tips. "Celestila Moonn, a UMB intern at SchoolStreet, Inc., made the following statement: Bond markets are markets in which bonds are issued and traded. By purchasing either the U.S. Treasury Bonds or Greek Government Bonds, I can lend money to the U.S. Treasury or Greek Government. Since bonds are amortized security, I do not have to wait until maturity to get interest payments and the principal amount back from the Greek Government. So there is no default risk. Discuss whether Moonn is correct with respect to the Greek Government bonds and amortized security." March 15, 2023. https://academic.tips/question/celestila-moonn-a-umb-intern-at-schoolstreet-inc-made-the-following-statement-bond-markets-are-markets-in-which-bonds-are-issued-and-traded-by-purchasing-either-the-u-s-treasury-bonds-or-greek/.

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"Celestila Moonn, a UMB intern at SchoolStreet, Inc., made the following statement: Bond markets are markets in which bonds are issued and traded. By purchasing either the U.S. Treasury Bonds or Greek Government Bonds, I can lend money to the U.S. Treasury or Greek Government. Since bonds are amortized security, I do not have to wait until maturity to get interest payments and the principal amount back from the Greek Government. So there is no default risk. Discuss whether Moonn is correct with respect to the Greek Government bonds and amortized security." Academic.Tips, 15 Mar. 2023, academic.tips/question/celestila-moonn-a-umb-intern-at-schoolstreet-inc-made-the-following-statement-bond-markets-are-markets-in-which-bonds-are-issued-and-traded-by-purchasing-either-the-u-s-treasury-bonds-or-greek/.

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