# Bond income calculation question

I thought I got my Bond income right, but my brokerage company's calculator got me totally confused. So here is the problem: I bought a note (US treasury) yesterday: cusip: 912828TN0 (secondary market) Coupon rate: 1% Maturity date: 8/31/19; Settlement date - 5/1/19; YTM at a purchase point: 2.409%; I paid accrued interest: \$1.68; my principle: \$995.20; Can you tell me, please, how much money should I get back on 8/31/19? :) Thank you so much in advance!

• These are sold with a \$1000 face value per note. Doesn’t the statement tell you the value at maturity? – JTP - Apologise to Monica May 1 '19 at 23:46
• I know the value at maturity. That's not what I am asking about. I'd like to know how much money, in total, I am supposed to get back, including the interest – GemStone May 1 '19 at 23:51

Assuming you bought one \$1,000 note, you will get \$1,005 at maturity. The \$1,000 principal plus the 0.5% (semi-annual 1%) coupon.

You paid for roughly 2 months of accrued interest (`\$5 * 2/6 = 1.67`) when you bought the note, and get the full 6 months when it settles, so your net interest will be \$3.32.

Your net yield is therefore `(1005/996.88 ^ 12/4) - 1 = 2.46%` The difference between that and your quote is probably due to a more accurate daycount than just the number of months to maturity.

I bought a note with the Yield to Maturity of 2.409%. Shouldn't I be getting 6 month of this annual rate? and NOT the coupon rate?

No - yield to maturity is your return relative to what you paid for the note, and annualized (in your case, the return is 0.8% or about \$8 over 4 months). The interest paid is fixed at 1% of the note amount (or 0.5% twice a year).

• I killed my answer. T-bills are semi-annual as you wrote. I’m guessing that’s what OP has. – JTP - Apologise to Monica May 2 '19 at 0:11
• You had me doubting myself for a minute :) – D Stanley May 2 '19 at 0:12
• Thank you so much for your answer. Here what I am confused about: I bought a note with the Yield to Maturity of 2.409%. Shouldn't I be getting 6 month of this annual rate? and NOT the coupon rate? – GemStone May 2 '19 at 0:24
• @GemStone See my edit. – D Stanley May 2 '19 at 0:32
• Yes, that makes sense. 0.8% is my return for 4 months - it is 2.4% annually! :) At the end it aligns. – GemStone May 2 '19 at 13:59