How To Compute Interest And Yield On Corporate Bond
Here are instructions for how to compete interest and yield on a corporate bond. Corporate bonds accrue both interest and yield amounts. These amounts are determined by different guidelines and rate tables. In order to compute interest and yield on corporate bonds, you must:
Obtain the guidelines issued by the Internal Revenue Service for determining the following: what the corporate bond yield curve for the current month will be, the 24-month segment rates for average corporate bonds and transitional rates (in other words, rates that were taken from time periods other than 24 months) that are used to compute a corporate bond’s target normal cost and the funding target.
Determine the plan year for which you want to compute the interest and yield. It is very important that you take care when doing this, because many of the amounts for both 24-month segment rates and transitional rates changed as of September, 2009.
Determine whether or not your computations will need to include both 24-month segment rates and transitional segment rates. This will depend on the plan year, as transitional rate rules do not apply to those starting in September, 2010.
Go take some pain relievers for the headache you just got from trying to do all this, and then call your financial advisor. He can help you with all this.
The process of computing interest and yield on corporate bonds can be very difficult and confusing. However, as long as you are keeping up with how the company or companies from which you have purchased the corporate bonds are doing, you can decide if you need to make any investment changes.