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16

Acually, you'd receive 103.125 in 6 months since the bond pays an annual coupon of 3.125%. You'd also pay about 97 for the bond based on the ASK price since you'll need the pay the amount of the coupon that's accrued to date (bond quotes do not include accrued interest), but that's still an annualized yield of about 19% according to your link. When a bond ...


15

Well, sort of. The quoted price in the secondary market is for the bond itself, but when you buy the bond you pay that price plus accrued interest. So the closer you are to the payment date, the higher the total cost.


14

I would argue that there's no difference even in transient low times. The dividend drops the value of the stock equivalently, so there's no difference from a wealth standpoint. Say you own 100 shares a stock that has a "natural" value of $100 for a total value of $10,000. Then a pandemic occurs, and it drops in half to $50 for a total value of $5,000. ...


14

Unlike Stocks or ETFs where there is a hard cutoff of dividend ("Ex-Dividend"), the buyer of the Bonds has to pay "Accrued Interest" to the seller if the Bonds were purchased between two payment dates. The Accrued Interest is prorated calculation is accurate to 1 day.


8

No, you are not quite correct. Assume you have a simple bond that costs you $100. There are 2 ways the bond provides you money: It might provide you with interest every month/quarter/year, or it might provide you with a future repayment of, say $105. Either way, this bond would be considered 'fixed income' because the value you receive is not based on ...


8

Untangling the passage: Northern Pipe Line Co. was then trading at $65 per share. He learned that Northern Pipe Line Co. held at least $80 per share in high-quality bonds. (That is, the company itself owned assets that, when divided by shares outstanding, had a value of at least $80.) (This implied that the company's stock was undervalued. Even if the ...


7

As a general rule, when you look at the price of a publicly tradeable security, assume it is fairly priced. If a market is reasonably efficient, then any public information about the underlying company or commodity is incorporated into how professional traders feel about the future profitability of that thing. You could argue that this isn't always the case -...


6

Bonds move inversely to their own yields, which are calculated from the bond prices themselves. It sounds circular, but it just means prices and yields are two alternative ways of looking at bonds. A government bond's yield is often considered the market's expectation for the average of short-term rates (as set by the central bank, noted by Mike Scott) over ...


6

This is an old question that has been bumped because of an edit, but there's one point that I think was overlooked: The "high risk" you're seeing for a bond ETF is comparing the risk of that ETF to other ETFs in the same investment class. So its risk (and average return) is high compared to other bond ETFs, but will most likely be less than the ...


6

It's called a transfer in fraud of creditors, and the bankruptcy court would claw it back. It could also be a crime.


6

Is this a good idea? It's not a terrible idea, but it sounds like it's based mostly on emotion, so it may not be the best move financially. It's a trade-off of reduced risk and (possibly irrational) anxiety for most likely lower return. There are segments of bonds that can earn 8-10% on average, but with that kind of return you're bringing in different ...


5

I think you're taking "fixed income" a bit too literally. They are funds that consist of fixed-income investments. They provide nothing unless you're able to sell for a higher price than you bought, is this correct? When the interest is re-invested, the total value of the fund will increase. So the fund will grow by reinvesting the coupons (all else ...


5

You can go to the link below to find out https://www.treasurydirect.gov/BC/SBCPrice


5

Remember the back-half of that financial rule - in financial theory, tax consequences aside, you can simply use dividends received to purchase back more stock. Therefore in either case, you have the ability to decide - do you want cash, or do you want to hold more equity? Receiving the dividend means the value of your shares goes down [because the ...


5

The principal amount of a debenture is usually $1000. Since this is a 8% subordinated debenture, the annual coupon will be 8% of the principal. In other words, the investor will be paid a total of $80 every year. In the US bond market, the convention is that unless you are explicitly told otherwise, the coupons are assumed to be paid semi-annually (i.e. ...


5

United States Treasury bonds and notes are called "risk-free" because there is effectively zero risk of default by the lender. This is because the US Treasury can, if needed, simply "print money"* to pay its debts. These bonds do carry other risks, for example that inflation could reduce the value of the payments below the original ...


5

Bonds typically have two main components: principal and coupons (interest). The principal amount is the contribution of the bond towards financing whoever issued the bond, like the loan amount on a mortgage. Bonds generally pay coupons every 3-6 months and at maturity they repay the principal amount. If you own a single bond with a principal of 1,000$ until ...


4

There may be some country out there that has that control of the corporate economy, but in the developed world, corporate bond rates are NOT set by the government. They are set by the corporation when they issue the bond, and are based on market interest rates for companies with similar default risk. The higher the interest rate of a bond, the higher the ...


4

I can imagine there are people selling on the secondary market at given interest rates, therefore the rate changes on the basis of those trades. No - the rate for a given bond is fixed, and is set by the entity that issued the bond (there are floating-rate bonds, but the rate is not determined by the market for that bond, but rather by some other "reference"...


4

A bond is like a loan. The issuer receives money up front in exchange for a fixed set of payments. Let's think about how the issuer views the situation where the rates on similar bonds fall. If prevailing rates suddenly become low, then the issuer can now take out a new "loan" with lower rates by issuing a new bond with lower coupons. So ...


4

Your yield calculations are oversimplified, but that's not the point of your question. The question is - could a company buy back it's debt for a discount and screw over bondholders. It would be highly unlikely. There are some assumptions that would have to be made in this scenario: First, the company would need to have the cash on hand to buy the bonds. If ...


4

Is a mortgage-backed security (MBS) something retail investors can buy? Technically, yes, but they are designed to be sold to institutional investors in bulk (i.e. in increments of tens of thousands of dollars). You probably can't buy, say, $500 of an MBS. If you want exposure to the MBS market you can look at ETFs that invest in MBSs. Plus, there are ...


4

CDs will give you the best return with zero risk. Bonds will lose value if interest rates go up, unless you buy risk-free treasury bonds that expire in 1 and 2 years. I doubt the return on those will be any better than CDs, though. If you are just interested in preventing loss, another option would be to invest in index funds and buy put options that expire ...


3

Bonds are currently high in price but there are some predictions of them going higher. An economic slowdow could send bonds higher but that's also assuming that inflation declines. With an increasing government deficit, it would be possible, as in the future, to have both slow growth and high inflation. That's stagflation. If worried about a loss on bonds ...


3

Survivorship bias applies to hypothetical (backtested) portfolios, not real ones. An ETF (or mutual fund) reports the return attributable to its holdings (stocks or bonds) while it held them. A bond ETF holding "A" bonds may buy a bond recently upgraded from "B", but any price jump associated with the upgrade is already reflected in the purchase price and ...


3

Your question assumes that all government bonds with a positive yield are more reliable than any company's bonds. There are some circumstances we should take into account here: The best government bonds have a negative yield already (for 10 year bonds this includes Japan, Switzerland, the Netherlands and Germany - currently even France). The bond that was ...


3

Bonds are offered at different interest rates; the market works to make them effectively equal. Imagine the Feds are offering 1% interest. Now someone else (X) offers 1.1%. Why in the world would you (or anyone) buy Fed bonds that give 1% when you can have 1.1% by buying from X (assuming X is equally stable and secure as the Feds)? What happens is that ...


3

Absolutely. For example, let's look at two of the largest US private companies: Cargill and Koch Industries. You can see the rating for a bond issued by Cargill: a USD 50 million issue paying a 7.1% coupon, maturing 20270729, with ISIN US141784AR94. You can see the latest Moody's review of Koch Industries credit and a rating of their commercial paper (short ...


3

In the US, retail investors can buy mortgage-backed securities issued by Ginnie Mae, Fannie Mae, Freddie Mac, and other private issuers. These securities trade over-the-counter, so you will need to find a dealer to ask for quotes. Not all stock brokerage firms deal in MBS. The minimum investment is usually $10,000 to $25,000. FINRA has a good basic article ...


3

And yet I only hear about the use of technical analysis for stocks, futures, commodities and currencies (forex). Perhaps you don't know any bond traders who use technical analysis, hence you're not hearing about it? There aren't many articles or books about technical analysis for bonds. Technical analysis is about analyzing price and volume data. ...


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