| How do i know how much a payout will be on a bond dividend?

How do i know how much a payout will be on a bond dividend?

Greg S asked:


Say I buy a $1,000 treasury bond, that had the following information
29-YEAR 6-MONTH BOND
Issued: 11-15-2007
Matures: 05-15-2037
Interest: 5.000
% yield: 4.666
price per $100: $105.322155

Can someone break this down for me?
I understand the issue and mature dates.

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Comments

One Response to “How do i know how much a payout will be on a bond dividend?”

  1. The Shadow on March 21st, 2009 10:31 pm

    If the bond has a face value of $1,000 and a coupon of 4.66%, then the annual interest (it’s not technically a dividend) is $46.60 (1,000*.0466).

    The issue date is the date that the bond becomes available for purchase and begins paying interest. The maturity date is the date that the bond ceases to exist (”matures”) and your principal is repaid. You also receive your final interest payment at that time.

    Note that you will have a capital loss if you hold the bond to maturity. The current price is $105.322155, so you will be paying $105.322155 for a bond that has a par value of only $100.00. You will only receive the par value if you hold the bond to maturity, so you will lose $53.22 on a $1,000 bond.