The Garraty Company has two bond issues outstanding.?

Question

Both bonds pay $100 annual interest plus $1,000 at maturity. Bond L has a maturity of 15 years, and Bond S a maturity of 1 year.
Anyone know of a good financial calculator to come up with the following:

a. What will be the value of each of these bonds when the going rate of interest is (1) 5 percent, (2) 8 percent, and (3) 12 percent? Assume that there is only one more interest payment to be made on Bond S.


b. Why does the longer-term (15-year) bond fluctuate more when interest rates change than does the shorter-term bond (1-year)?

Answer 1

Bankrate.com has excelent calculators for compounding interest rates. And to answer your queshtion about the long term bonds, the reason they fluxuate is very similar to why a long term CD has a lower interest rate than a short term CD. The future for interest rates is unknown, they go up and down depending on the state of the economy. Thus, bond rates fluxuate wildly due to the long term commitment that the company who issued the bond to you is responsible to pay. You want my advise? if you have 15 years to let money sit, put it in stocks.
Do this, take 120 and subtract your age from that number, the number you come up with is the percentage that you should have in stocks "Alan Greenspan". Stocks beat bongs 99% of the time over a 20 year period, but only beat stocks 60% of the time in a year, if you have time GO WITH STOCKS. Good luck
-Dean

Answer 2

AIG was be a best stock to invest if you plan to invest for a long term, because AIG is too big to fail and beside AIG no longer need government bailout money. if you invest in AIG are now you returning profit is 10-30 times in 3-5 years.