How Do I Know What My Bearer Bond Is Worth?
A bearer bond does not specify who the owner is. Anyone bearing, or holding, the bond can cash it. Because this makes bearer bonds nearly as liquid as cash, these bonds haven't been legal to issue in the United States since 1982. However, a small number of the bonds are still in circulation because some had a long maturity period. Thus, people who come into contact with bearer bonds must figure out what they're worth.
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Face Value
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Similar to any other bonds, bearer bonds have a "face value." This is the amount you receive from the bond if you hold it to maturity. It's normally clearly indicated on the bond. Assuming the issuer still exists in good financial standing and you hold the bond to maturity, your bond is worth at least the face value amount. If you cash the bond in early, you may pay a penalty that reduces the bond's face value.
Interest and Coupons
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Unlike other types of bonds, bearer bonds normally have coupons attached. You redeem the coupons at set periods, normally biannually, to collect the interest for the bond. The process of doing this traditionally has been known as "clipping coupons." As with its face value, the bond normally indicates its interest rate. A bond with the majority of its coupons left generally is worth more than one with only a few. However, some issuers dictate that the coupons become void if not redeemed within a certain period, so this doesn't always hold true.
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The Issuer
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Even though bearer bonds don't stipulate who owns them, the face value, interest rate and number of remaining coupons normally are fairly clear. These data provide a good starting point for determining worth. However, the real question with bearer bonds lies in determining whether the issuing company remains in operation. This is a huge task because company names and ownership routinely change. Using the Internet and getting help from registering agencies such as the Secretary of State, you can trace the issuing company through name changes and mergers, although you may have to dig pretty far to find out if the company reincorporated in another state. There are various companies that will perform this research for you for a fee, but depending on the actual worth of the bond, this might not be financially wise. If the company has dissolved or is in bankruptcy, your bond may not be worth anything. If the issuer still exists in good financial standing and the bond is mature, you should be able to contact it to collect the face value of the bond plus the interest from remaining coupons.
Collector Value
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Some people enjoy keeping old stock certificates and bonds, even if they aren't redeemable, simply for the historical value these instruments possess. This practice is called scripophily. Historical value depends on various things, such as who signed the bonds, the date of issue and the exact issuing company. If you find out that you cannot cash a bearer bond or any of its coupons, you may be able to find someone in this market who's willing to buy it from you. In this case, the value of the bond is whatever price you set and can get from a buyer.
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