This chapter covered bond basics. How should you, as an investor or investment manager, put this information to work?

      Now that you've been exposed to basic facts about bonds, their prices, and their yields, you might try applying the various principles we have discussed. Do this by buying some bonds and then observing the behavior of their prices and yields. Buying Treasury bonds is the best place to start.

      With a simulated brokerage account (such as Stock-Trak), buy two Treasury bonds with the same maturity but different coupons. This will let you see the impact of coupon rates on price volatility. Similarly, buy two bonds with very different maturities but similar coupon rates. You'll see firsthand how maturity determines the risk of a bond.

      While you're at it, calculate the durations of the bonds you buy. As their yields fluctuate, check that the percentage change in price is very close to what your calculated duration suggests it should be.

      To learn more about bond prices and yields, visit some interesting Web sites such as Bonds Online (www.bondsonline.com), Investing in Bonds (www.investinginbonds.com), and James Baker & Assoc. (www.jamesbaker.com).