Essay: Corporate Bonds
Fixed Income Requirement: Must buy at least one individual corporate bond – remaining fixed income assets can be mutual funds, ETF’s or other types of bonds.
Analyze the individual security selection of one required corporate bond
Since different corporate bonds have different amounts of risks associated to them, it follows that different interest rates will be used. In order for a person to make the right choice when it comes to investing in corporate bonds, he or she should first start by determining whether he or she is really a risk taker.
A risk taker will go for the bonds with higher interest rates but higher risks and thus can loose everything or earn so much from the investments. On the other hand, a person who is not a risk taker should have to go for the less risky bonds, which have low interest rates attached to them. This way, he or she will sure that the possibility of him or her loosing in the investment choice is very low but he or she will earn little interest. Therefore, in making decisions on the corporate bond to invest in, the investor has to link the interest rate charged with the risk involved and thus make the right choice.