W
woolybully
Guest
I'm new to bond trading, so be gentle. I have some basic questions on bonds - they are sprinkled throughout.
How do I calculate the the value of a bond at maturity?
Assume a coupon of 2.75%, maturity date of 8/15/2007, price of 100.452 and a YTM of 2.579.
If I buy a $10000 bond with those valuse, how much will I have on 8/16/2007, not including taxes? It's a simple treasury. I know if it's a zero, it would be worth $10000. If I hold it to maturity, would it be better to buy a zero or a regular bond? (I know about having to pay taxes on the phantom interest on the zero)
There are several bonds that mature on that date - another one has a coupon of 6.125% but costs 109.452 and YTM of 2.562. I get higher interest, but pay more up front. Which is a better buy? Is there a reason why I would pay more up front to get essentially the same YTM?
I would plan on holding the bonds to maturity. In that case, YTM rules, right? If I wanted to bet on the bond market and assume that interest rates are going to rise over some time period, then the the price I could sell either bond for would fall. Which of the two bonds above would be the better bet? Or would it better to buy shorter term bonds while the rates are rising and then lock in the higher rates with longer term bonds?
Also, what happens when it matures, assuming that I have it held in street name at my brokerage? Does $10000 appear in my account?
Thanks for any help.
How do I calculate the the value of a bond at maturity?
Assume a coupon of 2.75%, maturity date of 8/15/2007, price of 100.452 and a YTM of 2.579.
If I buy a $10000 bond with those valuse, how much will I have on 8/16/2007, not including taxes? It's a simple treasury. I know if it's a zero, it would be worth $10000. If I hold it to maturity, would it be better to buy a zero or a regular bond? (I know about having to pay taxes on the phantom interest on the zero)
There are several bonds that mature on that date - another one has a coupon of 6.125% but costs 109.452 and YTM of 2.562. I get higher interest, but pay more up front. Which is a better buy? Is there a reason why I would pay more up front to get essentially the same YTM?
I would plan on holding the bonds to maturity. In that case, YTM rules, right? If I wanted to bet on the bond market and assume that interest rates are going to rise over some time period, then the the price I could sell either bond for would fall. Which of the two bonds above would be the better bet? Or would it better to buy shorter term bonds while the rates are rising and then lock in the higher rates with longer term bonds?
Also, what happens when it matures, assuming that I have it held in street name at my brokerage? Does $10000 appear in my account?
Thanks for any help.