Question

Many investment portfolios are diversified amongst bonds and stocks. Use research to analyze bonds and find investment opportunities.

Step 1: Post a response to the following on the discussion board.

If appropriate, include personal experience in your response.

Use a stock website such as Yahoo Finance (Links to an external site.), Nasdaq (Links to an external site.), Morningstar (Links to an external site.), or others to look up municipal bonds of the state you live in (Type in your state followed by the word "Municipal"). Answer the following questions:

1. What is the name of the Municipal bond?

2. What is it currently trading at?

3. What is the 52-week high and low trading price for the bond?

4. What are the advantages and disadvantages of investing in a municipal bond?

5. What are the advantages and disadvantages of investing in a treasury bond?

6. What are the advantages and disadvantages of investing in a corporate bond?

7. Which bond would you prefer to invest in: a municipal bond, a treasury bond, or a corporate bond? Explain your reasoning.

Answer 1

Municipal bonds are those bonds which is issued by government in order to meet state/local needs of the public such as constructing roads, railways, education institutions etc. Municipal bonds are less risk debt which the public invest and in return government agrees to pay a fixed rate of interest. In India, the current rate is 6.36% ; at the maturity date the investor will get his whole amount. General obligation bonds, revenue bonds are some types of municipal bonds.

1 year means 52 weeks. The 52 high/low week trading price for a bond means ' 1 year or 52 weeks a stock has been traded highest and the lowest rate. In 52 week, the rate of bond is high then its good to sell that bond. If the rate of the bond is lowest, then its good to purchase the bond.

The merit of municipal bond is that the interest received by the investor is tax free and this type of bonds has less risk as it is from government. One of the demerit is that the interest is low compared to treasury bonds.

The merits of treasury bonds are it is totally safe as it is completely risk free security and it is excemped from local taxes and it is fully trusted bonds backed by central government. The demerit is that it is lower yielding bonds but not less than municipal bonds.

Corporate bonds are debt securities issued by the corporate/companies inorder to raise funds from public. The main merit is that there are various option of corporate bonds available in market. Investor can choose from different types. Corporate bonds shows high liquidity as it can be easily purchased or sold out. The demerit is that it is hihly risk bonds and low yielding security.

I will invest in treasury bills because it is safe and risk free and i can earn a decent income from treasury bills