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http://boards.fool.com/calculations-for-bond-fund-interest-payments-12540637.aspx
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| Subject: Calculations for Bond Fund interest payments | Date: 5/9/2000 1:55 PM | |
| Author: trhattan | Number: 646 of 34965 | |
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Please help clarify how bond funds work regarding the interest they pay. If I pay $1000 for an individual bond paying 10%, I expect to get $100 per year for the life of the bond. The payout is not affected by changes in current interest rates in the general market. If I pay $1000 for shares (100 at $10.00 / share) in a bond fund that currently is paying 10% interest, I would expect to also earn $100 per year on the investment. However if the NAV goes down (say to $9.00 / share) due to increases in interest rates in the overall market, but if the fund has neither bought nor sold any bonds, how much interest dollars could I expect to receive? I.e, how are current interest payouts computed for a bond FUND? Would a person who spends $1000 today to buy into the fund at 9.00/share (111.1 shares)get more interest money payed out then I would? Thanks |
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