ok I feel stupid asking this,but here goes

[ucodegen]

Yes, but the discounting will be exactly offset by the higher yield of the “new” 5-year compared with the “old” 10-year.

You are forgetting transaction costs. There is no point in the sale/purchase at the 5 year point if it ends up being a wash. All you are doing is feeding the broker. Second part of the problem is that if the interest rates are rising as the sale/purchase is being done, the discount will be affected by anticipations of further rate increases.

[4plexowner]

so if I invest in a $1000 bond that pays 3.5% and I hold that bond for 10 years in an environment where monetary debasement (inflation for you plebes) is 5% per year, how much am I ahead at the end of those 10 years?

Google “certificate of guaranteed confiscation” for more info

[4plexowner]

so if I invest in a $1000 bond that pays 3.5% and I hold that bond for 10 years in an environment where monetary debasement (inflation for you plebes) is 5% per year, how much am I ahead at the end of those 10 years?

Google “certificate of guaranteed confiscation” for more info

[4plexowner]

so if I invest in a $1000 bond that pays 3.5% and I hold that bond for 10 years in an environment where monetary debasement (inflation for you plebes) is 5% per year, how much am I ahead at the end of those 10 years?

Google “certificate of guaranteed confiscation” for more info

[4plexowner]

so if I invest in a $1000 bond that pays 3.5% and I hold that bond for 10 years in an environment where monetary debasement (inflation for you plebes) is 5% per year, how much am I ahead at the end of those 10 years?

Google “certificate of guaranteed confiscation” for more info

[4plexowner]

so if I invest in a $1000 bond that pays 3.5% and I hold that bond for 10 years in an environment where monetary debasement (inflation for you plebes) is 5% per year, how much am I ahead at the end of those 10 years?

Google “certificate of guaranteed confiscation” for more info

[EconProf]

You are behind.
You are earning 3.5% per year and losing 5% on your principal, so you are losing 1.5% per year.
This ignors compounding and also state and federal income taxes, which can be important as well.

[EconProf]

You are behind.
You are earning 3.5% per year and losing 5% on your principal, so you are losing 1.5% per year.
This ignors compounding and also state and federal income taxes, which can be important as well.

[EconProf]

You are behind.
You are earning 3.5% per year and losing 5% on your principal, so you are losing 1.5% per year.
This ignors compounding and also state and federal income taxes, which can be important as well.

[EconProf]

You are behind.
You are earning 3.5% per year and losing 5% on your principal, so you are losing 1.5% per year.
This ignors compounding and also state and federal income taxes, which can be important as well.

[EconProf]

You are behind.
You are earning 3.5% per year and losing 5% on your principal, so you are losing 1.5% per year.
This ignors compounding and also state and federal income taxes, which can be important as well.

[4plexowner]

yes, I forgot about taxes

the ‘gain’ on the 10 year investment is $350 as far as the IRS is concerned so the investor now owes capital gains taxes for his investing acumen

let’s see, lose 1.5% per year and owe capital gains taxes on $350

does compounding over 10 years bring us back to even in real terms?

[4plexowner]

yes, I forgot about taxes

the ‘gain’ on the 10 year investment is $350 as far as the IRS is concerned so the investor now owes capital gains taxes for his investing acumen

let’s see, lose 1.5% per year and owe capital gains taxes on $350

does compounding over 10 years bring us back to even in real terms?

[4plexowner]

yes, I forgot about taxes

the ‘gain’ on the 10 year investment is $350 as far as the IRS is concerned so the investor now owes capital gains taxes for his investing acumen

let’s see, lose 1.5% per year and owe capital gains taxes on $350

does compounding over 10 years bring us back to even in real terms?

[4plexowner]

yes, I forgot about taxes

the ‘gain’ on the 10 year investment is $350 as far as the IRS is concerned so the investor now owes capital gains taxes for his investing acumen

let’s see, lose 1.5% per year and owe capital gains taxes on $350

does compounding over 10 years bring us back to even in real terms?

[Author]

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