Discussion Assignment Example | Topics and Well Written Essays - 250 words - 80

Discussion - Assignment Example The problem with municipal bonds are predictable as they pay twice in a year, and a sale of the bonds virtually guarantees the present market price for the bond, which may be less or more than the first release price, obviously without the additional penalties. However; they carry comparatively low interest rate relative to the other types of securities. High yield low quality bonds are very risky on the long haul compared to the higher quality bonds. Their vulnerability to economic and credit risk is obvious, as they are unrated from agencies such as Standard & Poor’s or Moody. In securities investment, it is always advisable to diversify one’s investment in different classes and categories of investment, and pooling of resources in one investment bag can be counterproductive especially in high risk bonds such as the lower quality bonds. Instead of investing in five of the 15-year corporate bonds; he should have appropriated in different bond classes. Investing in different bonds ensures that a fall in price as a result of low high interest in one class of bond is compensated with a high price as a result of low interest in another class of