Corporate Bond Funds
corporate bond funds
Bond Mutual Funds- Best For Those Who Want Low Risk Investment
In these tough economic times it is hard for you to trust a particular type of investment. Luckily, mutual bonds offer some sort of shelter during these times and give you a chance to still make money. However, it is advisable that you take your time when you are choosing the type of mutual fund that will work well for you. Investing in bonds is a good idea and this ensures constant interest payments and possible capital appreciation when the bond prices increase.
Bond mutual funds help you achieve this and much more. The middle risk investment venture that pursue strategies that are supposed to give higher returns. Investing in bonds and debt securities is less risky than stocks. They also provide the stability that many investors are looking for and since they are diversified, there is the reduced risk of default. In addition some bond mutual funds are also federal or state tax exempt. They are also more liquid than bonds since they can be bought easily and sold in smaller units. It is not easy to buy bonds and hold them since they are not as liquid as bond funds.
There are many different types of bond funds. The government bond funds invest in debt securities that are offered by the government such as treasury bills, treasury bonds, treasury notes etc. Then there are the municipal bond funds that invest in securities issued by the state and/or local governments for doing public works like building bridges, constructing schools etc.
Some of these are exempt from federal taxes since they have the backing of the federal government. The corporate bond funds invest in debt securities of corporations. They are a bit more risky than the other two types as they are not backed by the government. Despite this, they pay out a higher income in comparison to government funds.
What is the difference between a share of stock in a corporation and a corporate bond?
1. A difference between a share of stock in a corporation and a corporate bond is that
a. the bond owner has voting rights within the corporation whereas the stockholder does not.
b. the bond owner is entitled to receive a fixed annual coupon payment plus a lump-sum payment at the bond’s maturity date, whereas the stockholder is entitled to a share of future profits.
c. the share of stock is a legal claim while the bond is not.
d. stocks are issued in return for funds that are lent to the corporation.
2. The Dow Jones Industrial Average is an index used to track the average price of all stocks on the New York Stock Exchange. How many corporate stocks are included in the DOW?
a. 30
b. 500
c. 90
d. 250
1- B
2- A
Stockholders have voting rights within the corp. In the event of bankruptcy bondholders are paid before stockholders. Bonds are issued in return for funds lent to a corp (in a sense).
CMA High Income Bond Portfolio, Corporate Bonds, Coupons,Chicago
