Your Questions About Stocks And Bonds

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Daniel asks…

This is Stocks and bonds trying to make sure I am doing it right for my final?

Your company has an 8 percent coupon bond on the market with 12 years to maturity. The bonds make semi-annual payments and currently sell for 108 percent of par. What is the current yield on your bonds? I got 8% am right
sorry i got 7%

financi4 answers:

I get 7.4 percent. If par is $1000 then 108 percent = $1080. 80/1080

Steven asks…

Is a 6% return reasonable for stocks and bonds over the long-run?

Is a 6% return reasonable for stocks and bonds over the long-run?

Obviously stocks can be much higher and bonds can be lower. What kind of assit allocations will I need to get a 6% return. I.e, what % of stocks and what % of bonds?
long term is the idea
You are actually saying 9 is what to expect from stocks? Awesome.

financi4 answers:

I’ve heard that the 100 year average for stocks is anywhere between 8-12% return per year, so yes 6% is a reasonable expectation. Bonds pay a lower return, but are considered safer. If you only expect a 6% rate of return (ROR), you can allocate more of your portfolio in bonds. You can also invest in dividend yielding stocks, generally older & larger companies, to help.

BTW – at 6%, your investments will double in value every 12 years. By being a bit more aggressive and getting an 8% ROR, it will double every 9 years. This is a long-term plan and is not advisable if you will need the money sooner, rather than later.

Richard asks…

What will happen to our economy in terms of stocks and bonds if Japan wants to cash what they loaned to us?

Will they do such a thing?

If so, what are the repercussions?

financi4 answers:

Well, first, it’s China that holds most of the US debt not Japan. Japan’s economy has been struggling for 20 years now and they have the highest public debt of any developed nation.

Second, the nature of bonds is that you can’t cash them in till they mature so all that China can do is sell them to someone else and who are they going to sell that debt to? Japan? (Remember that Japan has an even higher debt)

David asks…

How will it be constitutional to force people to buy stocks and bonds when Social Security is privatized?

But not constitutional to force them to buy health insurance?
The last proposal was actually very clear that you had to buy a percent equal to your age in government bonds and buy an annuity when you reached retirement age.

financi4 answers:

It won’t be . And for those who say abolish it all together I hope Sr.’s like myself who have paid into the system all of their lives will take note and NOT vote right wing anything .
Democrats may have put a freeze on it but Republicans could take it away altogether .
There are such radical factions now in the GOP.

Thomas asks…

I have a question regarding stocks and bonds?

The City of Memphis offers zero-coupon bonds with twenty years to maturty. The yield to maturity on similar bonds is at 6.75%. Assuming that the bonds compound interest annually, what is the purchase price for one bond at issue

financi4 answers:

About $270 per bond give or take a few cents, I think.

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