Quote:
Originally Posted by DaFace
Buying a 1 year bond is different than buying a bond with the intention of selling it. If you hold to maturity, you won't lose value (assuming the issuer doesn't go under or something). A 1 year CD is another similar option.
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Let me help you with one little caveat here: if you buy a bond today trading ABOVE par, (greater than $1,000 face for each bond), you will lose principal but the interest earned will cover the capital loss. Unless you buy a German government negative yield bond, the craziest shit I've ever seen.
If you had a 15 year 12% interest corporate bond issued back in 2004 that was to mature in 2019, it might cost $1,225 for each $1,000 face. So you lose some principal upon maturity but the interest payments provide a positive return.
You have COUPON YIELD, CURRENT YIELD and you have YIELD TO MATURITY to take into consideration whenever you buy any bonds.