No. of Recommendations: 1
Except for the one you list first, which seems to be paying one really nice coupon, the rest are items your friend bought at a significant discount from face, and which pay no interest. The profit lies in that if the strips are held to maturity, they pay full face value. Meanwhile there is the matter of "imputed income". If these investments are held not in a retirement account, he is supposed to pay tax every year on interest he didn't get. If they are held inside a
retirement account, then this annual tax payment is not necessary.
The zero coupon strips can be a good investment, either if held to maturity or if interest rates drop substantially from when he bought them. In general, bonds are an investment to be owned, not one to be traded. The markets, especially for the municipal issues, are thin and the spreads too wide for him to be able to make profit, but if you just leave these investments right where they are and forget them for the next 10 to 18 years, they should work out fine.
You do need, or he does, to know how to pay the imputed interest when paying taxes, however, if these
aren't in a retirement account. Best wishes, Chris
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