Provide feedback to the below statement on bonds. Word count of 250-300 words:
Typically, bonds are more conservative models of investments which are used by private, corporate and government agencies to raise money that funds projects or refinances debt. As rising interest occurs, the bond values decrease over time and make them less profitable. Bonds are different from stocks because they’re debt investments by which an organization borrows money from an investor, which could be fixed or variable, for a set period of time (Hayes, 2017). Most of the risk with bond investments are credit and interest rate risks. Credit creates the potential for a bond issuer to either neglect the principal or interest payments and/or default. Interest rate risk is the fluctuation of price to prevailing interest rates (Investopedia, 2014). To manage rate risk there can be two ways, forward contracts and forward rate agreements (FRA). Forward contracts are an agreement to make an exchange at a later date. FRA’s pays on a fixed interest rate and receives a floating rate which usually is equal to a pre-determined reference rate. They’re also calculated on the principal amount, usually paid out in cash.