What are premium bonds?

What are premium bonds?

• A. A type of savings account with high interest.
• B. A government scheme allowing individuals to buy bonds without interest.
• C. A fixed-rate investment option for regular income.
• D. A retirement saving plan.

Answer: (B)

Premium bonds are a government scheme that allow individuals to invest without directly earning interest. Instead of accruing interest over time like traditional savings accounts or fixed-rate investments, the money invested in premium bonds is entered into a monthly prize draw, offering the chance to win cash prizes. This unique feature attracts many individuals who are looking for a savings vehicle with an element of excitement as lottery-like chances of winning replace regular interest payments. Investors purchase these bonds, and while they do not receive regular interest payments or guaranteed returns, the opportunity to win large sums of money can make them an appealing option. The capital invested in premium bonds remains secure, as they are backed by the government, allowing for a degree of safety that may not be found in other types of gambling or risky investments.

Premium bonds are a government scheme that allow individuals to invest without directly earning interest. Instead of accruing interest over time like traditional savings accounts or fixed-rate investments, the money invested in premium bonds is entered into a monthly prize draw, offering the chance to win cash prizes. This unique feature attracts many individuals who are looking for a savings vehicle with an element of excitement as lottery-like chances of winning replace regular interest payments.

Investors purchase these bonds, and while they do not receive regular interest payments or guaranteed returns, the opportunity to win large sums of money can make them an appealing option. The capital invested in premium bonds remains secure, as they are backed by the government, allowing for a degree of safety that may not be found in other types of gambling or risky investments.