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To: Skeeter Bug who wrote (66305)	2/8/2000 4:39:00 PM
From: J.B.C.	Read Replies (2) \| Respond to of 152472

This is my last post to you on this issue, you obviously don't understand the bond market concept. Read this, understand this, be this. Scenario: You've loaned 100B to a group of homebuyers in February 2000, that have agreed to your terms of the loan, which is they pay you a single lump sum payment of 661.43B in February 2030. This equates to 6.5% compounded rate of return. One hour after solidifying the deal, interest rates skyrocket to 8.5 %, you're now sour on interest rate investments and want to get out, you go to a mortgage buyer (done all the time in real estate) to sell him the debt paper you now hold. HOW MUCH CAN YOU GET?????? You are going to get 57.2B! The buyer of your debt paper has 2 options: 1. buy the paper you're holding that pays a predetermined value of 661.43B in February 2030, or 2. go into the open market and buy a 30 year note that is NOW PAYING 8.5% compounded. How does he decide the value of your debt paper? By future value calculations, he must decide how much money he needs to invest now that will pay him a lump sum payment of 661.43B in February 2030. That value is called present value and IS 57.2B. Yes the debt holders "owe" you 6.5% interest or essentially 6.5B dollars of interest expense after year 1. BUT,! (big but here) their only real obligation is to pay you 661.43B in February 2030 nothing more nothing less. You don't get the 1st year "perceived" interest, you only get the ability to sell the debt paper and get present value. Your argument is old and incorrect, you've made the point for me that you don't understand the valuation and risk involved. My recommendation is that you go to your local bank and pick up a 5.5%, 2 year CD. Jim