Globalstar Telecommunications Limited GSAT Message Board

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Microcap & Penny Stocks : Globalstar Telecommunications Limited GSAT

GSAT 50.53

+4.7%

Nov 7 9:30 AM EST

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To: Jeffry K. Smith who wrote (11887)	4/23/2000 8:56:00 AM
From: Jon Koplik	Read Replies (3) of 29986

Jeff - explanation of yield to maturity being around 50% (annually), instead of either around 11.3% or around 31%. Yield to maturity figures in the fact that something you are buying today at (about) 37 cents on the dollar will "converge" to 100 cents on the dollar by the time the bond matures. It will ONLY converge to 100 cents on the dollar IF Globalstar does not default in any way on the bond's original promises. Those promises have two components : interest and principal. Because these bonds (like the vast majority of bonds) are NOT "zero coupon bonds" -- they promise to pay an interest payment each six months throughout the life of the bond, and then a re-payment of the principal (and, the last interest payment, too) on the final maturity date. The choice of timing of interest payments every six months (as opposed to monthly or quarterly) is just the way bonds (in the United States, anyway) happen to do things. Back to YTM (yield to maturity) -- the path from 37 cents on the dollar to (we hope) 100 cents on the dollar will happen in an erratic, unknown path. No one knows or can predict exactly how this will occur. If Globalstar appears to be very risky for several more years, but then still does "make good" on the bonds' promise, the bulk of the converging to 100 cents on the dollar will happen near the end of the life of the bond. YTM calculations arbitrarily assume that the path of convergence will be a nice smooth path. It is a mathematical thing. Hope this helps. Feel free to ask more questions. Jon.

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