You purchase a 3-year $10,000 corporate bond with a coupon rate of 4% in June of

Question

You purchase a 3-year $10,000 corporate bond with a coupon rate of 4% in June of 1929. In October of that same year, on Black Tuesday, the stock market crashes and interest rates on corporate bonds begin to rise. Even though interest rates to start to rise, you believe all of the financial experts who continually state throughout 1930 that "recovery is just around the corner!" However, by June 1931 it becomes obvious to you that recovery is not coming. Furthermore, you have seen your wages fall and you have to sell your corporate bond. In June of 1931, interest rates have fallen to 1%.

Assuming that you have already received the June 1930 and 1931 coupon payments, calculate the original and new value of your bond.

Explanation / Answer

http://www.treasurydirect.gov/BC/SBCPrice Use the calculator to determine the current value of your savings bond. Examples: A $100.00 U.S. Series EE Savings Bond issued 01/1995 is currently worth $90.72 A $100.00 U.S. Series EE Savings Bond issued 07/1995 is currently worth $85.60 A $100.00 U.S. Series EE Savings Bond issued 12/1995 is currently worth $83.36

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