Can I earn money by borrowing at 5.5% on margin and purchasing an investment that yields 8.77%?

If everything goes as planned, then you have an investment that is profitable. Here is what could go wrong: 1) The bond doesn't pay out the 0.117 for the entire year, due to financial issues from the debtor. 2) The debtor goes under and your bond may be worthless (you can lose your investment). 3) The debtor decides to pay the bond early and you don't receive the entire annual income you planned for. 4) The bond has a maturity date - what happens if the maturity is out further than you want to own this investment and the debtor gets in financial trouble - the bond is downgraded and the price of the bond plummets. 5) The bond has a maturity date that is beyond the time you want to own the investment and competing interest rates begin to rise - your bond will decrease in value and you will lose money.

Also make sure you factor in the income tax due on the profit. If you don't itemize or you pay AMT, this could be a very bad investment. Also, considering the risk in the economy, you need to wonder if this debtor will be around to pay the debt back.

It sounds good, but there are many other factors to consider. Also, if it were this easy, the guys on Wall Street would be all over it. There are guys in the arbitrage department who look for 1/8 points of profit and jump all over them when they find it. Imagine 327 basis points!

The PBH ETF is a high yield bond fund which means junk bonds (A bond with a credit rating below investment grade. These bonds typically offer a higher interest rate than investment grade corporate bonds.They are typically rated BB or lower).

Besides what the previous poster indicated, bonds rise and fall in value potentially causing capital gains or losses as they get less or more risky.

nope

taxes will beat you