brazilian treasury bond?

Question

i was wondering if i were to buy a 1000 dollars worth of Brazilian treasury bonds with a yield of 15.4% and its a 7 year bond how much money would i end up getting?

and if you could explain how bonds work like how to get paid how you make money off of it that would be really helpfull

thanks

Answer 1

I'm going to tell you how a US bond will work, though not an expert because I don't trade bonds. I'm a stock and option guy. Hopefully, a bond trader will pipe up. I assume Brazilian bonds are the same, but you'll have to check. Bonds are not like saving account. There are two aspects: The principle and the coupon. The coupon is the interest payment, but it is the principle that fluctuates. So, let's say you buy a bond that is worth $1000 at maturation, but due to market conditions the bond is trading at 98.6 or 986. Also it has a $50 coupon so you have a 5.07% yield (50/986). So, you get $50 per year, and if you hold until maturation which can vary, you'll have $1000. But recognize that principle can fluctuate on the market. Therefore at any given time you're bond could be worth more or less of $986. Principle is based on the market's perceived quality of the debt. But, you lose no principle if you hold until maturation provided you paid under par. Although if it's risky debt the debtor could go bankrupt and you get nothing:no coupons, no offer from secondary market, and nothing at maturation.

So, assuming Brazil works the same, you should just understand what the maturation value is, and the coupon and how often the coupon is paid. That is what is important. The yield is just a quick answer to the equation to gain a quick picture. A 15% yield is a whole lot of yield so there seems to be some perception that Brazil is risky. However I used to travel back and forth to Brazil a lot and it is a country with it's act together.

Finally, when dealing in foreign debt you have to understand what the debt is denominated in: US $ or Brazilian $Real (pronounced Hey-ow in Portuguese). Brazil is paying it's debt right now, while the US is growing it. Based on that and my watching of the currency market, I'd rather have Reais right now. Since my travel's it's moved from .33c US per Real to 46c, a 30% increase in value. You can see that kind of increase also, if it is denominated in Reias, but recognize the risk that I can be totally wrong about it's current quality! Currecny is very important.

And one more thing? Where is this bond traded? Is it bought from the government? If so, fine, but what is the secondary market like? In the US we have a secondary market to trade our bonds we buy from the governemnt. I assume that Brazil does also in São Paulo, but how do you get access?

I have a lot of Brazilian friends, but sorry, they are not financially savy.

Good luck. I just wrote an article on Brazil on my blog, but sorry no bonds talk. That ain't my area of expertise.

http://gmoolah.blogspot.com.

Answer 2

properly, of direction you does no longer purchase such bonds with US money, you would first might want to replace the U. S. money for Brazillian Reais and then purchase the bonds. the danger you're taking are contained in the substitute price. authorities bond yields can variety quite between international places as a authorities's monetary regulations are with the purpose of controlling their personal monetary gadget and the Brazillian monetary gadget is in a reliable position at the moment compared to the U. S. monetary gadget. Will that be the case over the life of the bond? properly it truly is the danger that you will be taking. no longer all governments are take care of, Brazil probable is a reliable guess yet keep in mind that contained in the late ninety's the Russian authorities defaulted on their bonds which had 40% yields. no longer a technical default like became threatened by the U. S. debt ceiling situation yet an all out throw your fingers up contained in the air and say "Oh properly" default. be conscious, you want to envision the taxation subject, an funding contained in the U. S. Treasury Bonds will be exempt from US taxes. although that's in all probability that the Brazillian equivalent will be exempt from Brazillian taxes, they might no longer be from US taxes so reckoning on your earnings tax bracket, that 10.ninety one% yield might want to correctly be as low as 7.a million% after taxes. you're extra useful off searching a severe yield municipal bond it truly is insured (municipal bonds do commonly default yet even in default they nevertheless finally receives a fee from liens on the houses contained in the municipality). at the moment, secure investments are at a perfect classification. it will be time to make investments in possibility. evaluate a mutual fund perchance with a average to conservative portfolio, i.e.: between 50/50 chop up between equities and bonds and 25/seventy 5 chop up between fairness and bonds. this type of portfolio can earnings from any further downturns by rebalancing and would nevertheless earnings from a fix.

Answer 3

$2,078.00 USD