Page 69 - Ready Set Retire
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Ready. Set. Retire!
of 10%, would you pay the same price for one paying only five?
No! Were you going to purchase the 5% bond, what would you
pay?
5/10 x 1,000 = 500
So suddenly your once very valuable bond has gone down in
value by 50%. Now you can elect to hold it to maturity, and if
the company is still in business you will get your money back.
But that means you will continue to accept a 5% interest rate
in a 10% environment. This may be okay, but it is something
to consider. And if you are at all concerned about the value of
your holdings, it bears a great deal of scrutiny.
Now, it’s important to consider this question; and remember
we have record amounts of money in bonds…
Are interest rates likely to go up, or go down? To answer, look
at this interest rate chart, courtesy of MoneyCafe.com from
data provided by the Federal Reserve:
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