Bonds Quotes
Posted by Gail | Filed under Investing
Check below for a new Sticky Situation.
When you set out to buy a bond, the price quoted is made up of a bid and an ask price. The bid is the price you would get if you were selling a bond. The asked price is what you would pay when buying a bond. Here’s an example of a bond quotation so you can see what all the numbers mean:
| 1 | 2 | 3 | 4 | 5 | 6 |
| Issuer/Bond | Coupon | Maturity | Price | Yield | Change |
| ATT | 8 1/4 | 15Ap24 | 122.8 | 8.094 | 0.5 |
1. The “Issuer/Bond” category indicates who is issuing the bond. This sometimes includes the original interest rate offered (8 1/4) and the date the bond matures (2024).
2. If the original rate isn’t listed under the “Issuer” category, it will be listed under “Coupon” (8 1/4). A $1,000 bond with a coupon yield of 8.25% pays annual interest of $82.50. The coupon yield on a bond does not change during the life of the bond.
3. If the maturity date isn’t listed under the Issuer category, it will be listed under the “Maturity” category. This bond matures April 15, 2024.
4. In this example, the price is $122.80. Usually when only one price is shown, it is the midpoint between the bid and asked prices. A full quote, in this example, might have been “122.60 bid, 123.00 asked.” Despite the fact a bond may have a face value of $1,000, they are always quoted based on 100. To figure the actual value of the bond, you must multiply the quote price by 10. So in this example, the quote price would actually be $1,228.00.
5. The yield quote refers to the yield to maturity. This takes into account both the interest received when the bond comes due, as well as the difference between the current price of the bond and its price at maturity. If a bond is trading at a premium (or at more than par value), the yield to maturity is less than the current yield. If the bond is trading at a discount (or at less than par value), the yield to maturity is more than the current yield.
The current yield on a bond is simply the annual interest divided by its current market price, multiplied by 100 to make a percentage. While the coupon yield never changes, the current yield will fluctuate based on the market price of the bond. In the case of this bond, the coupon rate is 8.25. However,bonds always have a maturity value of $1,000. Now, let’s assume the bond has been quoted at 122.80 as shown. This means its value is $1,228. The current yield is the annual interest ($82.50) divided by the current market price ($1,228), multiplied by 100 for a total of 6.71%. Despite the fact that the stated coupon yield is 8.25%, if you were to buy this bond in this market, you would earn only 6.71%.
6. The “Change” category simply shows the movement of the price of the bond during the most recent trading day. Again, this figure needs to be multiplied by 10 and indicates the value of the bond had increased by $5.
As you can see from this example, the yield on a bond can differ widely depending on what kind of yield we’re talking about. You have to understand what return you’re getting on your bond investment by understanding how the coupon yield, current yield and yield-to-maturity differ.
Next Week: Types of Bonds
Last Week: More About Bonds
———————-
Sticky Situation: The check arrives. You had a salad and water. Everyone else had steak, wine and dessert. It looks like everyone just wants to split the bill evenly. What would you do? Don’t forget the tip!
Don’t forget to vote on this week’s poll.
July 13, 2010 at 5:35 am
Now that I’ve had some practice in saying “no, we can’t afford that right now”, I would politely but firmly say that I could only pay for my portion and tip.
Before I would have split it evenly and had to go without somethng else from the grocery category to compensate.
July 13, 2010 at 6:17 am
No way would I pay more than my share – and I wouldn’t feel badly about it. I think if you have any qualms about only paying for what you ordered, you are too hung up on appearances – will you look cheap – and lack self-confidence. If you go out with people, you are supposed to have a good time – what feels good about paying more than your share when you don’t want to and feel you shouldn’t have to – it can ruin your outing. It may be just because I work in the Toronto towers office culture – but there are lots of co-workers who just wait for a group lunch and then order loads of stuff for themselves – counting on people being too afraid to speak up.
July 13, 2010 at 6:37 am
Hi Gail,
It was wonderful to meet you and all the people who attended the picnic on Sunday.
Thank you for the advice about my debt repayment. Now I feel more confident that my plan will work.
Cheers
July 13, 2010 at 6:38 am
Hello Gail,
Where would you go to buy bonds or to see the prices listed this way? What type of account do you need to buy bonds?
As for the sticky situation. because of where we are in life (Debt free completely) I wouldn’t mind splitting the bill evenly, sure I’m covering more then my share, but usually when I go out with friends to dinner I usually grab the bill anyways and say “I got this” Then I usually get the same protests and money thrown my way with insistences that they won’t pick it up again.
If I go out with friends I always go prepared to make it a treat for them. I’m so greedy I’ll hog a bill too.
regards,
Jason
July 13, 2010 at 6:43 am
Gail, thanks so much for the bond tutorial – wonderful stuff for newbie investors like myself! Sticky situation: not a fun thing to do but I’d simply say “I just had a salad and water – I’ll just put in $XX to cover that and a tip, does that sound fair?” Usually people will grudgingly agree when it becomes clear you’re not going along with the even split – in the event someone tried to push it, I’d quietly point out that the comparative value of what I’d eaten to what they’d had isn’t even close, so it’s really not fair to ask for an even split.
I will sometimes give a bit on this is it’s a bit closer in value, say I’d had a pasta and a glass of wine, while they’d had steak/wine/dessert – less of a big deal then. But if I’m feeling poor, I usually specify separate cheques at the beginning – feeling like I’m paying more than my fair share leaves an especially bad taste in my mouth when money is tight. But it does feel good sometimes when I’m feeling flush (and especially when I know things are tight for my dining companions) to simply pick up the bill myself
July 13, 2010 at 6:51 am
regarding the sticky situation, it would depend on who I was out with, close friends, work colleagues or family I would speak up and only pay my share. If it was a client or someone I didn’t know well and I would probably let it slide.
In reality through I usually am not the person ordering just the salad, if I agree to go out I usually don’t limit myself. If I don’t have the money I try to avoid making arrangements to eat out.
July 13, 2010 at 7:27 am
A few points on the sticky situation
1. as Lilly said…if I can’t afford it I don’t go…simple
2. as Jason said…I usually am the one to grab the bill as well:)
3. If I really only wanted to pay just my own bill then I would simply ask for seperate bills…no harm in that…also, if I was one of the steak eaters and we were going to just split the bill I would speak up for the salad eater and simply have him/her pay for that portion, deduct it from the bill and us carnivores could split what was left!…
July 13, 2010 at 7:48 am
separate bills – it’s no harder on the server to give everyone their own bills because everyone only ate what was on their plate. If I’m out on a business lunch or dinner, I would pick up the bill if it was my client, and I would expect the other person to pick up the bill if I was the client. Hopefully that would keep the business relationship on the positive side.
July 13, 2010 at 8:02 am
Sticky situation: I would ask for separate bills right from the start, or if not, I would only pay my share of the bill. I am always aware of how much things cost, and I don’t feel guilty about it. If I don’t have the same item, then I shouldn’t pay the same amount – no matter if it’s family, friends, etc.
July 13, 2010 at 8:12 am
I would’ve insisted on a separate check before ordering so that that situation wouldn’t arise.
July 13, 2010 at 9:11 am
I would likely have no qualms with letting my group know I would pay for mine plus a generous tip, pointing out that I chose a less expensive meal based on the entertainment budget. If I intend on splitting a bill with someone, it’s usually because we had a shared appetizer or something of equal value. And if it was my treat, I let my guest(s) know in advance of ordering that this is my treat. All around I think my dining habits are fair to all, including myself and my entertainment budget. (but maybe I just dine out with cheap friends who automatically announce everything is on a separate bill.
)
July 13, 2010 at 9:24 am
I agrede with Michelle. If you go out for a meal don’t order it if you can’t afford it. I usually asked for a separate bill right off the bat. Now if I ask a friend to lunch and I am picking up the tab that is different but I would rather not end up being pressured into paying someone else’s tab.
July 13, 2010 at 9:52 am
Ack! Numbers before my tea…. must not spontaneously combust. (Thanks for mentioning the details re: bonds seirously!)
Sticky: Generally speaking, it depends only upon whether or not I want to assist people with the bill or not. Which sadly depends upon my mood. I can tell you that in my 20’s — I was definately the “I only had a salad, so I’ll put in this amount (and the amount included generous tip). In my 30’s it was more half & half, depending upon the pay period and in my 40’s, I usually pick up the cheque alot (mostly because they usually come to my neck of the woods and pay for parking, do all the driving etc).
If it was a really large group of people, (like say 20), I would also agree to an even split, not wanting to do the math. I don’t go out to dinner planning on having the cheapest meal on the menu – so I have already budgeted the money for it regardless.
July 13, 2010 at 10:30 am
Hi. This is my first time replying but I read this site everyday! love it
About 15 years ago young and foolish. My husband and I went to a dinner at a restaurant to celebrate my brother in laws up coming marriage. We were treating him and his finace and told them so before ordering. Along for the dinner was all of his colleges.
when it came time to pay, my brother in law yells out to everyone “Don’t bother confusing the waitress, my brother will put it on his Visa and you just pay him the cash”!!! I sat there like a deer in headlights dumb
He is a very domineering person and we didn’t want to argue. Never met his co workers before and have never seen them since.
Of course I was the one only having a salad ( I was 7 months preg and not feeling well) but hubby had a healthy meal and as a celebration were paying for his brother and girlfriend. NOT for the people they knew. LOL
And as you can expect we were short changed by a couple of these strangers cause it was such caos cause there was about 30 people at this dinner…… We vowed to never be in that situation again and always ask for our own cheque. If its a birthday meal we will tell the waitress in advance that the lucky birthday person goes on our bill AHEAD of time LOL
Talk about a sticky situation and being put on the spot with over 30 people staring at you Uggg
Thanks for listening to me vent ha ha
July 13, 2010 at 11:47 am
as a vegan (who’s meal is almost always the cheapest on any group tab!) i encounter this sticky situation alot. however, because people are often aware of the vegan thing (usually they ask why i don’t want cheese with that), i find that there’s usually a moment where people look to me to see what i’m contributing rather than suggesting we divide it. if all else is equal (not a special occasion, they didn’t come out to my neighbourhood and pay extra for parking, etc) i often say, “are you sure that makes sense?” to the person who suggests sharing the tab. that’s their cue to back out while saving face.
However, one things that I found works well in avoiding this situation: if you’re sure you ordered the cheapest meal, do your best to take control of the tab. that way, you can put in what you have to right away, or if someone asks, say that you wanted to see what you would have to put in so everyone else can divide the rest evenly.
the way to come out of this looking not looking cheap is to offer a generous tip (which, having spent MANY years as a waitress, i often do). although no one should feel cheap for paying for what they ordered, i appreciate that the pressure is there. but, in my opinion: anyone who tries to get someone else to pay more than their fair share is the cheap one.
July 13, 2010 at 11:53 am
ooh – i just remembered: ever since i started using gail’s method of living on cash, this situation comes up a LOT less!
i tell people that i’m conducting a ‘living on cash only’ experiment (which is usually an interesting and pleasant conversation starter), and since i don’t carry a credit card, i’m not usually expected to pick up the tab, or stuck in the situation where everyone wants to give me cash and have me put it on my card. high five unexpected benefit of gail’s plan!
July 13, 2010 at 2:06 pm
I was recently considering adding bonds to my RRSP portfolio, until I found out that my annual account fee would jump from about $50 to $125! I resent having to pay fees for any sort of bank account or investment account, and I certainly wasn’t ready to increase my payments by 150%!
So, the question is, if one wants to have bonds in an RRSP, is there a way to do so without paying exorbitant fees? In fact, is there a way to do it for free?
Michael W
July 13, 2010 at 4:24 pm
Michael W — check the fee schedule of your investment firm, usually fees are based on the number of different types of investments you have, if you only have one type that is cheaper than if you have more than one. The reasoning behind this (justified or not) is that different trading licenses are needed to trade different types of securities and so more investments means more expensive traders (or more than one) dealing with your account, as well there are usually more tax forms the investment firm to keep track of.
That being said, generally the most expensive to lease expensive types of accounts are margin accounts, equities, bonds, mutual funds and GIC/cash accounts. I have seen a lot of mutual fund only accounts with low fees.
$125 is at the higher end of the annual fee scale for self-directed RRSPs, are they offering advice/recommendations as well? You might want to shop around.
I am with Credential Direct and their mutual fund and fixed income only RRSP fee is $25 per year, goes to $50 to add in equities and options.
July 13, 2010 at 4:41 pm
I can’t remember a time where this happened. Usually you just get separate bills unless someone decides they want to pay the whole shebang.
July 13, 2010 at 4:56 pm
jessie, that is so smart! gets a good conversation going AND meets your needs. leaves you in control & serves your purposes too. i’d never thought of it that way so i think, if i should find myself in this situation, i’ll borrow your idea!
July 13, 2010 at 7:10 pm
We know a couple who regularly leave less than their share and others are left having to chip more in. They have the works too! People have stopped inviting them to group dinners out. Sad, really.
July 13, 2010 at 10:40 pm
I totally agree with Brenda and Colleen, I usually make a point of asking for separate checks at the time of ordering. When it has not been possible, I make sure to ask before the waitress brings the bills.
I have witnessed far too many times when with one bill, someone always short changes the bill and almost every time the server gets shorted on the tip.
I have often had to throw more in for the tip, people just can’t figure out the percentage; which I now pay either 18 or 20%.
If nothing else, Gail has encouraged us to be real and honest.
July 20, 2010 at 6:07 am
[...] Last week: Bond Quotes [...]