1. Your Questions About Bonds Calculator
Ruth asks…
Should I cash in bonds to pay of debt?
We have 4 1000 EE Bonds. I used the Savings Bonds Calculator and all 4 equals about
2,000. The bonds range in date from 2000-2003. Three of the bonds are only earning about
2% and one is earning 4% for now. I was wondering if I should cash in the bonds to pay off
some of my debt?
I don't care about paying the taxes. We always get money back at the end of the year so it'll just
come out of that.
Steve Winston answers:
Angela,
Cashing in the bonds is certainly a possibility, but there are other options as well.
There's a good article at eHow on steps to take to begin tackling your debt. Take a look at it:
http://www.ehow.com/how_2326032_avoid-escalating-debt.html
How to Stop Escalating Debt
You can also look here for tips on earning some extra cash online:
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2. http://www.ehow.com/how_2254361_money-internet.html
How to make money on the internet, scam-free
Lastly, here's an interesting alternative to conventional lending...getting a "social networking"
loan from Virgin Money (from the same folks who run Virgin Airlines):
http://www.ehow.com/how_2310995_student-loan-through-virgin-money.html
Social Loans from Virgin Money
Hope these help.
Sharon asks…
Is there a bond calculator out there?
Ex: You buy a 30 year treasury at 4% interest today.
But in 10 years you might sell it.
Interest rates could be 10% then.
No one will want to buy your 4% bond - so you will lose quite a bit of principal if you want to sell.
Clearly - you will go into the negative - in a huge way.
Is there a calculator out there to help me figure this out?
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3. Steve Winston answers:
Correct = of course between now & 10 years you will have received 10 x 4% = 40% in interest
....
So, plainly, if you are worried about inflation (and I suggest you SHOULD be), perhaps you
should stick to Index Linked Bonds ???
Calculators do exist, however the problem is, what Interest rates are you going to assume ???
PS = NS&I just withdrew the 'consumer' Index Linked product PLUS there is talk of switching
Pension linking from RPI to CPI == all this suggests (to me) that the BoE is expecting Inflation
to let rip (i.e. Another few hundred billion £££'s of paper are going to be printed) ... Inflation is
the one Tax that no-one can avoid .. Unless you have Index Linked products, of course ..
Ken asks…
Can a financial calculator compute for the valuation of bonds or
stocks?
thanks
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4. Steve Winston answers:
No it can not in the real sense of value.
Value is always what someone is willing to pay for your asset. Always!
A calculator can only compute future payment of bonds and price ratios of equities. It takes no
risk into account. Nor does it look at market conditions.
Thomas asks…
Surely the premium bond Calculator they use is wrong?
It doesn't matter if you keep your money in for one month or ten years, you have the same odds
on a month to month basis, as long as you keep same amount in.
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5. Steve Winston answers:
If the draw is made using all the numbers in existence then the odds are the same in every draw
(which I think is the case)
Mark asks…
Can EE savings bonds go down in value?
i have EE bonds from 1993, 1998, and 1999 - and i plugged them into the "savings bond
calculator," and either they've gone down in value, or i'm reading the data incorrectly.
Steve Winston answers:
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6. They never go down in value. They are always worth their purchase price plus accrued interest.
Steven asks…
Can I calculate YTM without Excel or Calculator?
I understand calculating YTM generally requires financial calculators or Excel.. Can I calculate
the questions below without using any calculator?
A bond has a coupon rate of 8 ¾ percent and has 12 years to maturity. This bond has a face
value of $1000 and is selling in the market for $1231. What is this bond’s yield to maturity?
Steve Winston answers:
Yes. Here are two ways.
1. You can take the present value of a) present value of the sum of the cash flows for each
year, b) and then take the present value of the maturity amount in year twelve. Once you have
the equaltion set up you would solve for interest rate. This would be a PAIN!!!! So the best way
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7. is to use number 2.
Here is a good example of 1. Http://www.moneychimp.com/articles/finworks/fmbondytm.htm
2. You would take the present value annuity equation and set the coupon payments as the
payments, and fill the rest of the equation with what you have. Then to that equation you would
add the present value of the face value of the bond. Again you would solve for the interest rate.
You can use the present value annuity because your coupon payments are constant over the
12 years.
The 2 methods may give you slightly different results, but they are both correct ways.
Hope it was not too complicated.... I tried to explain the best I could
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