1) What is the difference between bond types and bond features?

Features are contained in the bond indentures e.g. a call provision or sinking funds. Conversely, types of bonds include collateral trust bonds, mortgage bonds and equipment trust certificates. The type of bond determines what is collateralized, how it is secured and what rights the bondholders have. For example, a mortgage bond collateralized by a building would require a legal proceeding in the event of default. An equipment trust certificate, on the other hand, is collateralized by rolling stock. Title to the rolling stock remains with the certificate holder until the debt is repaid. In the event of default, the process of collection is streamlined, since title to the assets already rests with the certificate holders. No lien is required.

2) Are there any restrictions on the ownership of Canada Savings Bonds?

Yes. According to Canada Investment and Savings a buyer must have a permanent residence in Canada and been in residence for six months. CSB's may be held by estates, charitable organizations, sole proprietorships, personal trusts, RRSP's, RRIF's and DPSP's. Corporations and mutual funds do not normally purchase these investment. Additionally, there are restrictions on the dollar limits of CSB's, as well as when these bonds can be purchased. Canada premium bonds (CPB's) which replaced Canada RRSP bonds are less liquid than CSB's.

3) Who buys junk bonds?

Due to the nature of this investment, buyers should be prepared for volatility and the higher risk potential of this type of bond or debenture investment. The junk bond purchaser should expect the same type of volatility as with an equity investment. The incentive to participating in this type of investment is the very attractive yields. For the average investor, a junk bond mutual fund offers diversification as well as management expertise.

4) What is a tranche?