Originally Posted by
bottomfeeder
Just to clarify. The bonds were issued last year 100million at 3.3%. Every $10000 you invested you get $330, before tax.
I Pur hased the bonds at the quoted interest rate of 6.9 percent. I paid for $10,000 bonds at maturity by the payment of $8,342.16. So I still get the coupon value of interest of $330 a year. But because I paid less it works out to be an interest rate of cash 3.96%. If all remains the same the difference of $1,705.47 I get in five years time, a sort of deferred interest. So over the 5 years in total I get a return averaged out at 8.04%.p.a. Note I. Can sell at ant time. Provided all remains equal, as I get closer to maturity date the bonds can be sold for proportionately more so that I get a piece of the deferred interest. So my return stays at $8.04% p. a..
Where the complications come in is if interest rates become volatile. If interest rates go up markedly, I still get my 8.04 percent to maturity. Unless I sell then I get less. If interest rates drop ie Covid, recession, war foot and mouth. etc then if I hold till maturity, I still get my 8.04 percent. Or If I sell I will get more return on investment. I prese tly hold four shares, which if they go down, I will probably buy more. These shares and industry I know better than others. So I am not looking for other investments. So if it all turns to total ****, I have some safer more secure investments to fall back on. I already have 730,000 OCA, and while I have 95% confidence they will get to $1.30 soon enough, I am not risking everything on that thought. So spare cash is going into bonds at the moment on the way up.. I have other bonds as well. I am retired. I don't have the luxury of losing all of my money and then starting again, such as some of you younger guys and gal's.. So some of my decisions have to border on conservatism.