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A bond, simply defined, is a type of investment which is very similar to an IOU. It is aloan in the form of a security with two basic components, the face value (principle), andthe coupons (interest rate). The bond is a contract between the issuer and the bondholderto pay certain amounts of money in the future. The issuer of the bond promises to pay thebondholder principle and interest according to the terms and conditions listing in the

bond. Many cities and countries issue bonds to fund new highways and other suchprojects.

The definition ofbond yieldis the rate of return on the bond, which takes into account thesum of the interest payment, the redemption value at the bonds maturity, and the initialpurchase price of the bond. Yield on the bond relates to the return on the capital youinvest in the bond. You will hear the term yield a lot as it relates to investing in bonds.There are many types of yields youll need to be aware of listed below.

Current Yield

The current yield calculates the percentage of the return that the annual coupon

payment provides to the investor. It calculates the percentage of the actual dollarcoupon payment is of the price the investor pays for the bond. This can be easilyfound by dividing the bonds coupon yield by its market price.

Coupon Yield

The annual interest rate established when the bond is issued. Yield to Maturity

This is the return that the investor will receive from their entire investment in thebond.

Yield to Call

Yield to call (YTC) is the interest rate that the bond holders would receive if theyheld the bond until the call date. The call date is the date on which a bond may be

redeemed by the issuer before the bonds maturity. If this happens, the bond willbe redeemed at par or a higher value. Yield to Worst

This is the lowest calculated rate that the bond holder will receive upon maturityor call date. It is typically calculated by conservative investors to determine theworst case scenario.Be sure to remember that once a bond is issued, the couponinterest rate is fixed. Therefore, if the market interest rates rise, then the price ofthe bond will fall so that the bond yield will be consistent with current marketrates.

U.S. Treasury BondA debt security backed by the full faith and credit of the United States government with amaturity of more than 10 years. They may be purchased directly from the government orfrom a bank; they have coupon payments payable every six months. Treasury bonds maybe bought competitively or non-competitively. In a non-competitive transaction, onetakes the interest rate he/she is given on a T-bond. In competitive investing, one bids on adesired yield, but this does not mean it will be accepted. Treasury bonds are low- risk,low-returninvestments. The minimum purchase is $1,000 and the maximum is $5 millionin non-competitive bidding or 35% of the offering in competitive.

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What Does Agency BondMean?

A bond issued by a government agency. These bonds are not fully guaranteed in thesame way as U.S. Treasury and municipal bonds.or A debt obligation owed by an agency

of the U.S. government. While similar to a Treasury security, federal agency securitiesare issued by a particular agency of the federal government, rather than the federalgovernment itself. Agencies that offer these securities include Ginnie Mae, the FederalFarm Credit Bank, and the U.S. Postal Service. With the exceptions of the Postal Serviceand the Tennessee Valley Authority, all federal agency securities are guaranteed by theU.S. government. They also offer higherinterest rates than Treasury securities.Mortgage--A loan to finance the purchase ofreal estate, usually with specified payment periods andinterest rates. The borrower(mortgagor) gives the lender(mortgagee) a lien on theproperty as collateral for the loan.

Corporate Bonds These bonds are issued by corporations and are used to raise capitalfor the issuing companies. They range from investment grade to junk grade depending onthe issuing companiesCorporate zero-coupon bonds are issued by corporations and are generally notrecommended for individual investors because of the risk of default private companiesand because the yield tends not to be very competitive in relation to the risk of theinstrument.

Variable-rate corporate bonds are securities that have a coupon payment based on a "baserate" and a "spread." The base rate is usually United States treasury note or some highgrade group of corporate bonds or corporate index. The spread is the additional amount

of yield necessary to sell the variable-rate bond at a competitive rate. A treasury baseyield of 5 percent and a spread of 1 percent would yield 6 percent to investors.There are 3 ways to close a futures position:

1. Delivery or cash settlement2. Offset or reversing trade3. Exchange-for-physicals (EFP) or ex-pit transaction

Delivery Most commodity futures contracts are written for completion of the futurescontract through the physical delivery of a particular good.Cash settlement Most financial futures contracts allow completion through cashsettlement. In cash settlement, traders make payments at the expiration of the contract tosettle any gains or losses, instead of making physical delivery.

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Basics of Mutual Fund

Mutual Fund is one of the oldest and most widely used investment vehicles in the world.Conceptualized almost 300 years ago, the Mutual Fund structure has not only survivedthe test of time and the many ups-and downs of the world financial markets, but it has

also flourished. Today the global Mutual Fund industry is gigantic, comprising of morethan 80,000 individual funds with over US$26 trillion in assets under management. Interms of reach, over 300 million retail investors across a hundred countries invest incapital markets through Mutual Funds. In recent years, the Mutual Fund industry inBangladesh has grown very rapidly. As of August 2009, 19 mutual funds were listed onthe DSE that accounts for 5.8 percent of the total market capitalization. The Mutual fundgrowth in terms of turnover trebled in the third quarter of 2009. The Bangladeshi MutualFund industry stands at an estimated value of 10,500 crore BDT, of which almost 5,500crore is close-ended Mutual Fund. With this staggering figure and more Mutual fundswaiting to enter the capital market, Mutual Fund is undoubtedly the most promisingsector in our capital market.

Three main reasons why this industry has been so successful are:

Through the pooling of assets, Mutual Funds offer you access to professionalmanagement at a minimal cost

Mutual Funds help small investors reduce their investment risks through diversification

Due to strict regulatory oversight and separation of the investment, custodial andoversight functions, Mutual Funds offer one of the most transparent and safe investmentvehicles