Encyclopedia of Investment Terminology

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Church Bonds

Church bonds are certificates of indebtedness issued by churches, and proceeds from the sale are used primarily to fund acquisition or expansion of the church property. Churches use the funding when conventional borrowing is not available; the bonds are secured by mortgages. In general, the bonds are held by members of a particular church. Maturities range from 6 months to 15 years, with interest paid or compounded every 6 months. The bonds are promoted as acceptable investments for Individual Retirement Accounts, although the ability to accurately value the bonds is questioned. Furthermore, the bonds most likely will not be rated, due to the nationally recognized rating agencies not analyzing this type of investment, nor are the churches willing to pay for a rating, especially when the rating may be less than investment quality.

Much of the above information is courtesy of the FDIC.

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