Skip to main content
No. of Recommendations: 1
On Feb 5 of this year, I bought five of someone's 5's of '22 at par in an effort to park some cash. However, Fido just informed me the bond is being fully called May 14 of this year at 105.14. That bumps my theoretical YTM to a whopping 23.7%, which sounds good, but really isn't.

What might be a more realistic YTM?

Let's assume I had been able to park the money until the bond's due date of 10/15/22. My holding-period would have been 1.69 years, right? and coupons rec'd would total $422.50. Now, my gain is $67.50 in coupons and a $257 call prem, for a $324.5 total. So the call imposes an opportunity cost, even if $37.33 is added by parking the money in a CD for the balance of the term at the current rates for such things.

The issuer benefited from the call. I didn't.
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.