Expert: Doug Ingram - 11/1/2007

Question
1.Where may Bonds be purchased-
2.How do the Bonds sold on the Bond Market differ-
3.How is the price of a specific Bond determined-
4.How do I make money buying Bonds-
5.How can I lose money buying Bonds-
6.What are the risks involved in buying Bonds-
7.What return should I expect when I invest money in Bonds-

Answer
1.  You can buy small bonds and savings bonds from the government.  www.treasury.gov
   You can also buy bonds from broker/dealers (look in the yellow pages).
2.  Bonds differ by the amount of time until maturity, the coupon, the issuer (government, state, city, corporation, and the rating based on ability to pay - some have insurance.)  Also, some are tax-free is that's a preference.
3.  Price is based on comparative current offerings (yield) and the rating (risk).  Yield is higher for more complex bond structures (risk).
4.  Bonds pay a coupon return and are usually safer than other investments.  If yields fall - the value goes up and they can be sold for a capital gain.
5.  If yields go up - the price falls.  If a bond's rating falls, it becomes more risky and the value falls.  Some risky bonds in failing companies could actually default - losing all or most of your investment.
6.  That a company will not be able to repay its debt or that the value might fall.  Unless you are experienced, it pays to make sure you are buying quality bonds and not overpaying.
7.  Right now, it's 4 to 6.  If rates fall, the actual return can be greater.  Generally speaking, bonds are purchased for safety and liquidity.