When you buy a bond and intend to hold it to maturity you will lock in whatever interest rate was the market rate at the time.
Now the current value of this bond might go up or down but if you hold until it expires, then this doesn’t matter to you (unless you use leverage, which you shouldn’t).
So say you buy a 2 year bond at 4.5% and then interest rates go higher to 5% the next day. Your bonds are worth less now (people would pay less for a bond only paying 4.5% because they can get 5% elsewhere). But you are still guaranteed that 4.5% each year for the next two years. If interest rates go down to 4%, then your bonds are worth more, but you will still only receive the 4.5% interest rate.
When you buy a bond and intend to hold it to maturity you will lock in whatever interest rate was the market rate at the time.
Now the current value of this bond might go up or down but if you hold until it expires, then this doesn’t matter to you (unless you use leverage, which you shouldn’t).
So say you buy a 2 year bond at 4.5% and then interest rates go higher to 5% the next day. Your bonds are worth less now (people would pay less for a bond only paying 4.5% because they can get 5% elsewhere). But you are still guaranteed that 4.5% each year for the next two years. If interest rates go down to 4%, then your bonds are worth more, but you will still only receive the 4.5% interest rate.
I-bond is a little weird, but might be good.
The upside for the next few days is you get 6.89%.
You can only put in $10,000 per year per social security number. You can put your tax refund in also, which I think is not part of the $10,000.
WHEN YOU QUIT IT, they keep the last months of interest!! Beware. You need a higher rate or longer term for this to be better than lower interest rates for short term.
In May sometime soon, the rate will drop for new investors. When you buy, it locks you in for months but not forever. It will change every so many months.
Its weird.
I-bond is a little weird, but might be good.
The upside for the next few days is you get 6.89%.
You can only put in $10,000 per year per social security number. You can put your tax refund in also, which I think is not part of the $10,000.
WHEN YOU QUIT IT, they keep the last months of interest!! Beware. You need a higher rate or longer term for this to be better than lower interest rates for short term.
In May sometime soon, the rate will drop for new investors. When you buy, it locks you in for months but not forever. It will change every so many months.
Its weird.
Latest Answers