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here is the two dqs I need responses to I need at least one

here is the two dqs I need responses to I need at least one

here is the two dqs I need responses to I need at least one of these responses by today please. Also needs to be200 to 250 words with citation and at least 1 reference. Thank you somuchClass mate one we need to reply to her post ChlseAbstractAccording to Investopedia bonds are “A debt investment inwhich an investor loans money to an entity (corporate or governmental)that borrows the funds for a defined period of time at a fixed interestrate” (Bond, n.d.). Bonds can be taken out to fund projects, and areconsidered an asset along with cash and stocks, which makes them afixed-income security (Bond, n.d.). Due to a bond being an investment,there is no guarantee on the amount that will be earned, or if the moneywill be lost (Bond Investment Strategies, n.d.). This means that likewith any investment, there are risks.BondsBonds can be purchased by anyone, but can only be taken outon large corporations or government entities (Bond Investing Basics,n.d.). They are a way for these groups to gather large sums of money tohelp fund their expansion, projects, or run their day to day operation(Bond Investing Basics, n.d.). There is usually a specific period oftime that someone who purchases a bond will loan their money for, and itis determined by the company or government that the money is going to(Bond Investing Basics, n.d.). At the end of this period, the bondpurchaser should receive their original investment, plus a certainpercent earned from loaning the money (Bond Investing Basics, n.d.).There are also tax-free bonds, which can earn their purchaser less moneybut could come out to be more money if considering the amount of taxes aperson would have to pay if a normal bond was purchased (Bond InvestingBasics, n.d.). It is important to decided what type of bond would workbest for each person and for what time period, because purchasing a lowyielding non-taxed bond may be worth more money in the end than a higheryield taxed bond. There are also different time periods for bonds, beit short term or long term (Bond Investing Basics, n.d.). Bonds areusually paid semi-annually, or every 90 days, but this is interest only,not paying back the principal (Bond, n.d.). The interest rate on thebond depends on the credit quality of the company and the duration thatthe person wants to purchase the bond for (Bond, n.d.). Government bondscan usually range from 90 days to thirty years (Bond, n.d.). Corporatebonds are usually between three and ten years, but it is up to thecompany if they want to make their own decisions and offer longer orshorter term bonds (Bonds, n.d.).RisksBonds should not be confused with stocks. Although they usedto yield about the same return from the initial investment, bonds latelyhave been giving larger returns to their purchasers (Bond InvestingBasics, n.d.). However, it is possible for people to loose money inbonds just like with stocks. Bonds have fixed interest rates, a personwill get a specific amount on their return which is known at the momentthe bond is purchased (Bond Investing Basics, n.d.). If the bond iswithdrawn early the purchaser may loose money, and if the bond is keptuntil maturity the purchaser will receive the predetermined amount (BondInvesting Basics, n.d.). That is, unless the company that the bond isthrough goes bankrupt or shuts down, which at that point all investorswill loose out on their money (Bond Investing Basics, n.d.). Choosingbetween short term and long term bonds should be considered as well.Each can come with different percentages and penalties for earlywithdrawal (Bond Investing Basics, n.d.). It is important to make surethat if going with a long term bond, that the purchaser is able to keepthat bond for the whole term until it reaches maturity. Going with longterm can be more risky in other ways as well. The interest on bonds isfixed, but inflation still very much affects them (Bond Investing Risks,n.d.). This means the interest payments may stay the same, but thevalue of the bond may drop drastically (Bond Investing Risks, n.d.). There are also call risks where the company or governmentmakes a person cash in their bond early and at the price that the bondis at that moment, even if it’s a lot less that it was originallypurchased for (Bond Investing Risks, n.d.). Another type of risk iscredit risk, where a company is unable to pay back its bonds andinterest on time (Bond Investing Risks, n.d.). There are insured bondsthat can be purchased which guarantee on time payments, but they usuallyyield lower interest (Bond Investing Risks, n.d.). Finally there ismarket risk. If the bond is selling really well and/or there are notenough to meet demand, a company can sell them for a lot more (BondInvesting Risks, n.d.). This also means that if the demand or popularitydrops, that bond is no longer worth that much and the purchaser mayloose money (Bond Investing Risks, n.d.).Due to the fact that there are risks with buying bonds, it isimportant to not invest all in one bond (Bond Investing Strategies,n.d.). By choosing a portfolio of bonds from different companies, aperson is safeguarding themselves from loosing their entire investmentbecause of one bad bond purchase (Bond Investing Strategies, n.d.). Aportfolio should contain government bonds, as well as company bonds fromdifferent markets and maturities (Bond Investing Strategies, n.d.). Byhaving different types of bonds a person is protecting themselves againfrom one type of marking going bad, and maturities to protect themselvesfrom the risk of bad interest rates (Bond Investing Strategies, n.d.).ConclusionBonds are similar to stock in the fact that they areinvestments into a government organization or a corporation to help fundtheir projects and operations. However, they are different becausebonds have different terms of maturity and are only usually wellprofitable if the money is left invested until the maturity date set bythe organization. This can vary from 90 days to 30 years depending onwhether it is government or corporation and what their preferences are.Bonds can be tax-free, but they are lower yielding, insured bonds arelower yielding as well. They are beneficial though because theyguarantee payment incase an organization is unable to pay or if they goout of business, in which case everyone who is not insured would loosetheir money. There are a lot of risks to bonds, so it is important toknow what to do before deciding to purchase any. It is important to havea portfolio with a lot of variety to protect oneself from marketsfailing or interest risks. It is also always a good idea to keep an eyeon inflation, because as that rises, the amount the bond is worth drops.References:Bond. (n.d.). In Investopedia. Retrieved July 26, 2013, from Investing Basics. (n.d.). In CNN Money. Retrieved July 26, 2013,from investing risks. (n.d.). In CNN Money. Retrieved July 26, 2013,from Investment Strategies. (n.d.). In Investing in Bonds. RetrievedJuly 26, 2013, from two KvnAbstractBond investment is an area of finance that must be fullyunderstood in order to have success. A main method of doing so is by notonly understanding the process of handling bonds in general anddetermining the optimal bond for the need, but also by understanding therisks involved, which include credit risk, default risk, inflation riskevent risk and more. When considering options as far as investments go, it is important toconsider numerous possibilities to ensure that one’s money is utilizedproperly. One manner in which a company or group is able to invest isthrough bonds. Bonds are a form of debt investment, in that the investorstarts by lending money to a group, whether corporate or not in returnfor these bonds. These bonds are similar to a promise made by theborrower that the cost of the bond will be paid back in a set period oftime (Eileen, 2004). Throughout the duration of this time, the borrowerpays the bond holder interest on the bond. Therefore, the investor usesbonds to finance projects as they need. At the end of the specifiedperiod agreed upon, there comes a point of maturation where theprincipal of the bond is paid off. Examples of different types of bondsinclude: government, agency, corporate, municipal, and mortgage-backedand others (Ehrhardt, 2011). As an example, a company may decide to purchase $50,000 worth of bonds.These bonds can either be of a high value or can be presented as 50bonds worth $1,000 each. Say the period in which the investor is holdingthe bonds is for 10 years, annually or semiannually the investor getspaid the set interest on the bond, also known as the coupon. If theinterest rate were set at 5%, then annually, the investor would get $50from the borrower. In this manner, bonds may be considered more securethan other options of investing such as the stock market, but they stillcome with their risks. Understanding these risks and making the properdecisions to secure these practices will yield the best results for theinvestor. One of the more important practices with bond investments isdiversification. In this process, an investor will purchase bonds fromdifferent issuers. A general rule mentioned is to never place “all yourassets and all your risk in a single asset class or investment.” Reasonfor this being that by purchasing from one location, all of your riskdepends on the ability of that borrower to hold true to the agreement.If they are unable to pay the interest or principle on their bonds, thenthe investor has a problem. In addition, if an investor is able topurchase different types of bonds (government, corporate, etc.), then ifone subdivision of the market goes under, then the investor’s riskagain isn’t completely lost (‘Bond investment strategies,’ 2010).Investors also need to be able to understand the market and the effectthat bond interest has on their plans. Companies may decide that theywant to maintain possession of their bonds so they can live out theirmaturity in a “buy and hold” strategy. Here, the investor will keepreceiving payment throughout the term of the bond usually semiannuallyand then receive the face value of the bond at maturity. In anothersituation, when the bond interest fluctuates, the investor may need tomake the decision to either continue to hold the bond, otherwise it maybecome “callable.” A bond may be callable if interest rates are fallingtoo low; in this scenario, the bond will be returned ahead of itsmaturity date and the face value of the bond will be paid earlier thanexpected. When the interest of a bond falls too low, the investor is nolonger receiving payments comparable to expected (‘Bond investmentstrategies,’ 2010).A few other risks to be aware of include risks of default, credit, eventand inflation risks. Credit and default risks are similar in the factthat the borrower might not be responsible enough to make their paymentsin a timely fashion. If this were to happen, just like a student loan,the borrower could default. These risks are less likely to take placewhen participating in mortgage backed and government loans, which areable to guarantee payments to their investors. An event risk comes aboutwhen the borrower takes a buyout, participates in a merger, orundergoes any change that reduces the value of their bonds. These eventscan also negatively affect the borrowers, which may cause them to notmake payments on time, leading to the same consequences as the otherrisks. Inflation plays a role in risk because the value of the dollarmay change tomorrow; the “purchasing power” of bonds may not be asstrong. In addition, as inflation takes place, it can lead to higherinterest rates, which in turn reduces the value of bonds (‘Risks ofinvesting,’ 2010).Overall, the practice of investing in bonds is an art where the lenderneeds to be aware of the proper types of bonds to invest in, the currentstates of the borrowers, state of the market and much more. By takingall of these factors into consideration, bond investments are less of arisky game and instead a quite stable and successful method offinancing. References:(2010). Bond investment strategies. The Securities Industry andFinancial Market Association, Retrieved Risks of investing in bonds. The Securities Indus try andFinancial Markets Association, Retrieved d=3&i d=383EILEEN AMBROSE, B. S. (2004, Nov 28). BOND BUYERS LEARNING ABOUT RISKS IN THEIR `SAFE’INVESTMENT. Daily Press. Retrieved from<='' span=''>Ehrhardt, M., & Brigham, E. (2011). Corporate finance: A focusedapproach. (4th ed., pp. 173-190). Mason, OH: South-Western CengageLearning.

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