Senior Moment I Guess

betaguy | Apr 1, 2024 | 180 posts since 2022

buy

quanity 10

UNITED STATES TREAS note

2.12500% matures 11/30/2024

ask 97.98

ask yield 5.264%

pay $71.99 accrued interest:

total cost: $9,874.39

How in the world is this 5.26% ????

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Answers

CuriousDave | Apr 1, 2024 | 233 posts since 2018

If we aggregate what we will receive (over and above the purchase cost of $97.98 per bond) for the 8 months thru 11/30/24, and assuming a purchase of 100 bonds for ease of computation, we have interest income of ($10,000 x 2.125% *8/12 =) $141.67, plus the discount of $202 we earn (upon maturity we receive $100 per bond, so the discount is $100.00 - $97.98, multiplied by 100), we get $342.67. Therefore, our yield (annualized return) is 342.67 / 9,798 * 12/8 = 5.26%.

IGR | Apr 2, 2024 | 580 posts since 2020

Fixed Income Yields isn't Annual or Real... it's an Assumption.
When you figure that you Press "Buy".
Or consult with P_D on what it takes to be digested figuring it
If you find CPA who can or willing to explain it to you, enjoy...you have a date!

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