Lottery Bond

AAA

DEFINITION of 'Lottery Bond'

1. A type of government bond issued in the United Kingdom by National Savings and Investment (NS&I) that gives the holder a chance to win a random monthly drawing for a tax-free cash prize. The bonds don't pay interest but they do encourage saving. However, because they don't pay interest, they are not protected against inflation.

Otherwise, these are considered extremely safe because they are backed by the U.K. government. The bonds can be purchased directly from NS&I or from the post office. Each bond is worth £1 and there is a £100 minimum investment.


2. A type of commercial surety bond that establishments with lottery machines must purchase to prevent abuse of the state lottery system.

INVESTOPEDIA EXPLAINS 'Lottery Bond'

Officially called Premium Bonds, the U.K.'s lottery bonds were introduced in 1956 with the goal of reducing inflation and attracting people who were otherwise not interested in saving. In 2008, £40 billion was invested in Premium Bonds, one of the country's most popular savings vehicles. A machine called ERNIE randomly generates the winning bond numbers. The amount of the prize fund is a month's interest on all eligible bonds, and multiple winners are paid prizes of varying amounts from that fund.

RELATED TERMS
  1. Coupon

    The interest rate stated on a bond when it's issued. The coupon ...
  2. Interest Rate

    The amount charged, expressed as a percentage of principal, by ...
  3. Bond

    A debt investment in which an investor loans money to an entity ...
  4. Principal

    1. The amount borrowed or the amount still owed on a loan, separate ...
  5. Registered Bond

    A bond whose owner is registered with the bond's issuer. The ...
  6. Lottery

    A game of chance, where winners are typically decided by a drawing. ...
Related Articles
  1. The Advantages Of Bonds
    Investing

    The Advantages Of Bonds

  2. Corporate Bonds: An Introduction To ...
    Bonds & Fixed Income

    Corporate Bonds: An Introduction To ...

  3. 3 Bonds You May Have Never Heard Of
    Bonds & Fixed Income

    3 Bonds You May Have Never Heard Of

  4. Convertible Bonds: Pros And Cons For ...
    Bonds & Fixed Income

    Convertible Bonds: Pros And Cons For ...

comments powered by Disqus
Hot Definitions
  1. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  2. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  3. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  4. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  5. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  6. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
Trading Center