Issue

In the case of a CMO, an IO tranche is created deliberately to pay investors only interest and not principal. IO securities are priced at a deep discount to the "notional" amount of principal used to calculate the amount of interest due.

Remarks: Bond funds including mutual funds (open-end and closed-end, actively managed and indexed), exchange-traded funds and unit investment trusts offer a convenient and affordable way to invest in a diversified portfolio of bonds, but a bond fund investment can differ from a bond investment in ways that are important to understand.