Question

Your parents are thinking about purchasing bonds with a 25-year term, but they are a little worried that they might need the money before the 25-year term is up. How would they go about accessing the money if they needed it before the end of the term?

Answer 1

If the money is needed before maturity of bond, then still money can be invested in bond and take out when desired. Below are the methods to do so:

1. Selling of bond in market: If the bond purchased is traded in market then money can be realised by selling that bond in the market. Transaction will happen at market determined value for that bond which may be different than face value.

2. Use it as collateral: This bond can be put as collateral with the bank or other financial institution. Based on the collateral value and some discount bank will provide loan against that bond. At the time of redemption bond proceeds will be used to pay loan amount.

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