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28

Your understanding is indeed wrong. Bond yield is the effective interest rate relative to the current market price of the bond, and it is anything but fixed. There was never anyone actually paying or receiving 42% interest in the whole affair. What happened is that bonds with a nominal interest rate of perhaps 10% (for simplicity's sake, and probably not ...


27

Great question! A Yield Curve is a plot of the yields for different maturities of debt. This can be for any debt, but the most common used when discussing yield curves is the debt of the Federal Government. The yield curve is observed by its slope. A curve with a positive slope (up and to the right) or a steepening curve, i.e. one that's becoming more ...


24

You're contemplating paying 30,000 lira ($5000 US or 4400 EUR) today for bonds with a face value of 37,500 lira. If Turkey doesn't go bankrupt, in one year the bonds will pay out 37,500 lira. If you had 37,500 lira today, that would be worth $6175 US or 5500 EUR. But you won't have 37,500 lira at today's exchange rate, you'll have it at next year's ...


10

What is a bond price? A bond is an asset, and like any tradeable asset it has a price. If I hold $10K face value of a certain GM bond, then I would be willing to sell it at some price, which may be more or less than $10K. Whoever is willing to sell it for the lowest amount determines the price. The price is determined by the market, just as all prices ...


8

Current yield is the coupon (dividend payment) divided by the current price. (If there are two payments per year, double this number.) Yield to maturity takes into account the final face value you get and the price you pay today, it's your actual return over the time you hold it till it matures. If you ignore the daily price movement and hold to maturity, ...


8

Possible reasons I can think of: You are a central bank. Your goal is to inject liquidity into the system by buying bonds, and you don't care about low or even negative returns. Your bond buying program drives yields lower by design. You are a bank who wants to safely park some money, but you are discouraged from depositing more than your reserve ...


6

Applying some simple Math: $725,000/$440,000 = 1.6477272727272.... So, your cumulative return is 64.8% if I round to 3 digits. Now, if I take the 5th root of 1.648, I get approximately 1.1050742047085970060712045917364 So, your annualized rate of return is 10.5%.


6

Here is a page on the US treasury notes Regarding how to purchase: You can bid for a note in either of two ways: With a noncompetitive bid, you agree to accept the yield determined at auction. With this bid, you are guaranteed to receive the note you want, and in the full amount you want. With a competitive bid, you specify the yield you are ...


6

Coupon tells us the rate of returns(%) for the bonds when it was first issued based on issue price Yield tells us the rate of returns(%) for the bond based on current price Assuming a bond was issued at $1000 , promising to pay $50 yearly , it has a coupon rate of 5% & yield of 5%. However, if due to unforseen circumstances the bond price drops to $500,...


6

Looking at the list of bonds you listed, many of them are long dated. In short, in a rate rising environment (it's not like rates can go much lower in the foreseeable future), these bond prices will drop in general in addition to any company specific events occurred to these names, so be prepared for some paper losses. Just because a bond is rated highly ...


6

Yield is the term used to describe how much income the bond will generate if the bond was purchased at a particular moment in time. If I pay $100 for a one year, $100 par value bond that pays 5% interest then the bond yields 5% since I will receive $5 from a $100 investment if I held the bond to maturity. If I pay $90 for the same one year bond then the ...


5

It would be preferable to purchase a bond with a negative yield if the negative yield was the smallest compared to similar financial securities. The purchase or sale of a security is rarely a mutually exclusive event. An individual may have personal reasons or a desire to contribute to the activity the bond is financing. To an entity, the negative yield ...


5

Is my math correct? The Math is correct, however Dividends don't work this way. The Yield is Post Facto. i.e. Given the dividend that is declared every quarter, once calculates the yield. The dividends are not fixed or guaranteed. These change from Quarter to Quarter or at times they are not given at all. The yield is 3.29% and the value is $114 per ...


5

You have the formula for dividend yield of a mutual fund correct. It is the annual dividend payment divided by the value of the mutual fund. This metric is just a snapshot of what the mutual fund is currently paying out at the time you calculate it. The net asset value (NAV) of a mutual fund changes daily as the price of the stocks contained inside it ...


5

For the same reason that some investors buy long-term bonds when the yield curve is inverted but positive: They expect that short-term rates will decline enough to make locking in the current long-term rate a good deal. Negative rates can't be very far below zero, because they compete with holding physical currency. But they can exist because currency does ...


4

I don't think you have your head in the right space - you seem to be thinking of these lifecycle funds like they're an annuity or a pension, but they're not. They're an investment. Specifically, they're a mutual fund that will invest in a collection of other mutual funds, which in turn invest in stock and bonds. Stocks go up, and stocks go down. Bonds go up,...


4

Let's say you paid $10,000 for a ten-year bond with a coupon rate of 5%. That's a promise from the bond issuer that they'll pay you $500 per year for ten years, and at the end of those ten years they'll pay you back your $10,000. The $10,000 is the bond's face value; the 5% is its coupon rate. Now suppose interest rates go up, so new bond issues are paying ...


4

I am currently trying out some variations (moving terms around ...) of the formula for the present value of money The relationship between yield and price is much simpler than that. If you pay £1015 for a bond and its current yield is 4.69%, that means you will receive in income each year: 4.69% * £1015 = £47.60 The income from the bond is defined by its ...


4

The duration of a bond tells you the sensitivity of its price to its yield. There are various ways of defining it (see here for example), and it would have been preferable to have a more precise statement of the type of duration we should assume in answering this question. However, my best guess (given that the duration is stated without units) is that this ...


4

The key concept here is called Yield To Maturity (YTM). This is the yield that bond has when held until its redemption date. It is calculated from the coupon and the price the bond trades at today. (Which may not be face.) What happens is that as interest rates rise and fall, the price that a bond will buy or sell for adjusts so that the YTM matches the ...


4

Why does selling a bond drive up the yield? The bond will pay back a fixed amount when it comes due. The yield is a comparison of what you pay for the bond and what will be repaid when it matures (assuming no default). Why does the yield go up if the country is economically unstable? If the country's economy is unstable, that increases the chance that ...


4

The main reason people go with lower interest accounts is for convenience of having the money in the same institution with other accounts (like checking, auto loans, credit cards, etc.) with their local bank. These online savings accounts are regulated by law to only allow 6 transfers out per month, so for people that need to make withdrawals more ...


3

The simplest was is to just divide your total dividends for the year by your starting capital for that year. For example, if you start with $100000 in capital and earn $5000 in dividends during the year your dividend yield for that year would be 5%. Even if you haven't fully invested your total capital during the year it is still available to be invested and ...


3

Say you buy a bond that currently costs $950, and matures in one year, at $1000 face value. It has one coupon ($50 interest payment) left. The coupon, $50, is 50/950 or 5.26%, but you get the face value, $1000, for an additional $50 return. This is why the yield to maturity is higher than current yield. If the maturity were in two years, the coupons still ...


3

YTM is yield achieved irrespective of reinvestment of coupons. Suppose $1000 bond with 10% YTM paying 10% coupons for 3 yrs(n) Case 1 : Reinvestment of coupons 1 yr 2nd yr reinvested @ 10% 3rd yr Final Value $100 - 100 * 1.1^2 121 - $100 100 * 1.1^1 110 So total return = 121 + 110 + ...


3

These are yields for the government bonds. EuroZone interest rates are much lower (10 times lower, in fact) than the UK (GBP zone) interest rates. The rates are set by the central banks.


3

0% bonds are desirable for some individuals. It depends on your situation. 0% bonds are usually sold well below par value (eg a 100$ face value bond for 2020 might sell for 90$ today) Hence, your gains will be CAPITAL GAINS. A similar investment paying interest would be taxed as INCOME, and smaller portion of capital gains. In many countries (US, Canada) ...


3

DIS has a .75 dividend per year. It's a bit over 1.3% per year. I don't follow the rest of your math, sorry. It takes a few second's effort to see the dividend is annual.


3

Investopedia does a perfectly fine job of explaining it: The percentage difference in current yields of various classes of high-yield bonds (often junk bonds) compared against investment-grade corporate bonds, Treasury bonds or another benchmark bond measure. So ... if a lot of people are buying junk bonds (i.e. reach[ing] for yield), those bonds' prices ...


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