We revisit a bond investment discussion of twelve years ago — interest rates were low then, too. You are at a children’s playground in front of a giant see-saw; you know, the ones that have been immortalised in childhood memories.Sitting on its very pivot point is Ed Striver Smith, CEO, of Creative Carpentry Products, a NASD publicly listed manufacturing corporation (CCP).Ed’s company manufactures wood products — outdoor furniture a specialty. Business has been good, so good, that CCP is expanding into global markets, but needs to raise capital to increase its production. Mr ES Smith is an excellent CEO who runs a tight, profitable, fiscally conservative company. CCP has just received an AA credit rating from Standard & Poors, a credit risk rating service. (See S&P Credit Chart.)What this little nugget of information signifies to capital market investors is that the repayment of principal and interest on securities (bonds) purchased from this company is almost (but not quite) guaranteed to be repaid, on time, for as long as CCP remains a viable stable company.Having been so finely vetted, CCP decides to float a USD $50,000,000 million bond issue paying a coupon rate of six percent annually, in $1,000 coupons, with a maturity date of 2023, but callable in year 2018. CCP figures this will give them sufficient cash flow to increase market share abroad, plan a ten year expansion operation, while generating far more revenue than the six percent interest expense they will have to pay each year to every bond holder.Excerpts from Finance, Practical Law Company state indicate that generally, there are four stages setting out the life of a bond subscription in a chronological sequence.— Pre-launch. The issuer considers preliminary matters and decides what type of bonds to issue and how to structure the issue. The issuer mandates a lead manager (investment bank and underwriting team) while attorneys are instructed to prepare the documents and the legal opinions.— Launch and roadshow. The lead manager announces the bond issue publicly and promotes the transaction to prospective investors, inviting them to buy the bonds once they are issued.— Issue. This involves two stages:— Signing. The lead manager and syndicate managers sign the subscription agreement, agreeing to subscribe (committing to invest in) the bonds on closing.— Closing. The fiscal agency agreement or trust deed is signed and the bond instrument is created. The investors receive the bonds from the issuer in exchange the purchase price of the bonds.Post-issue. The issuer pays interest to the bondholders as agreed until the bonds reach maturity. At that time, the bond issuer (CCP) will repay the principal amount of their original investment to the bondholders.CCP moves forward with the launch. The issue floats, the bond sale is successful, even you have been able to purchase 10 bonds @$1000 each!And CEO, Mr Ed, still sitting on the see-saw, is a happy man; his company has realised about $48,000,000 million from the bond offering, all of which sold. And, why not? In this low interest rate environment a bond with a coupon rate of six percent is highly desirable; investors, large and small, have snapped them up.Wait a minute, where is the rest of the money? Ah, that went to the investment bankers — you did realise they have to earn a living, too, and then some? Increased business for everyone, good for the whole business economic cycle.CEO Ed Striver Smith is also pleased to tell you that no matter which way interest rates and capital markets move, up or down and down or up, he, personally, and his company will still pay your bond coupon interest at an annual return of six percent to you. At the maturity date in 2023, you will be paid back the full $10,000 principal.That fact does not change, but let’s watch the see-saw effect when interest rates fluctuate. A bond coupon interest rate is not the same as bond yield. Some savvy investors may make more than your current bond yield.For those reading the column for the first time, and regular readers, hopefully, it should be obvious by now that we are in the pretend mode. Essentially, Ed Smith, CEO, and his company (CCP) are concoctions, teaching aids, if you will.Bonds are often classified in investment articles as being risky and volatile, but generally safer than purchasing stock. The classic textbook description of a bond is:a debt security, which obligates the issuer (CCP) to pay interest (usually semi-annually) and to repay the principal amount when the debt matures.Bond prices react to capital market interest rate swings, in the opposite direction. Back to the see-saw, and CEO Ed Sitting In The Middle. Again, he promises to pay you 6% until the bond matures, no matter which end of the see-saw, is up and return your principal. Can his company back him up? Do you believe him?Martha Harris Myron CPA PFS CFP TEP is an international financial columnist, a cross border financial planning specialist, and professional member of the American Citizens Abroad Professional Tax Advisory Council. http://www.aca.ch martha.myron@gmail.comThis article is not intended as tax, investment, or retirement advice, and cannot be relied upon for any personal financial planning purpose. Individuals should seek the services of a qualified financial planning professional.