>>60900945
>I can never understand bonds. Yields vs costs vs rates vs premiums vs sticker price vs the other price. Too confusing.
Imagine this:
You have $100 left. I tell everyone "Give me $100 today, and will give you a certificate that you can redeem from me for $121 exactly 2 years from today."
That certificate is a bond.
Costs: $100 (what you paid)
Sticker Price: $100
Yield: $121 - $100 = $21
Rates: 10% per annum ($100 * 1.1 = $110, $110 * 1.1 = $121)
You give me your last $100 and buy the certificate.
The next day, I tell everyone: "I have a new certificate for sale today. For $100, you can redeem it for $144 exactly 2 years from today."
Shit, that is a 20% rate, a much better deal than what you got. Coincidentally, you just remembered your BLACKED.com subscription just ran out and unfortunately you are out of cash. So you need to sell yesterday's certificate ASAP.
... But wait, why would anyone buy your old certificate from you for $100, when they can buy the new certificate which will pay +20% per year instead of your +10%????? Instead, you need to drop your sell price so your certificate, which is worth $121 in 2 years, will pay out +20% per year.
Face value: $84 ($84 * 1.2 * 1.2) = $121
You go to the open market and offer your certificate for sale for $84, which is a comparable price to the latest certificate. But Rabbi Sheckelstein knows you're desperate to blow your load to Elsa Jean getting plowed by Dredd's 9" BBC, so he takes advantage and offers to buy your certificate for $80...
Other price: $80
Premium / Discount: $20 discount
