The bond being issued will expire in 2048 There is also the 10 year and 30 year

# The bond being issued will expire in 2048 there is

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Department of the Treasury, 2018). The bond being issued will expire in 2048. There is also the 10 year and 30-year bonds that are being traded in the market at \$98.5 with a coupon rate of 2.88% and \$96.16 with a coupon rate of 3% (Bloomberg, 2018). This year, the United States has issued long-term bonds at a discounted price of \$98.26 and interest rates of 3% which has been consistent (US Department of Treasury, 2018). Thus it is easier to buy from the government and reduce on costs since the barrows intention is not trading. Assuming a purchase price and interest rate remains the same. In 30 years, the net present value of the investment will be \$3160.3 with an internal rate of return of 3.052%. Below is the present value of the cash flows.

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FIXED INCOME ANALYSIS Corporate Bonds One of the best bonds that are currently in the markets is the 15-year corporate bonds by Bank of America, each bond was set to go at \$1000 with a maturity date of 2033 (Bank of America, 2018). The note has an interest rate of 6%. The 6 percent annual interest rate will ensure that the Barrows get annual cash flows of \$18,000 which is above \$15,000. If Mr. and Mrs. Barrows go wealth preservation and end in 2033 with all the bonds original bought, they will have a net present value of zero and an internal rate of return of 5%. If they choose to sell the bonds throughout the period in such a way that they end up with 50% of what they began with, they will have a negative NPV of %5,827 and an internal rate of return of 6%. Selling bonds evenly throughout the years in order to end up with zero bonds will have an internal rate
FIXED INCOME ANALYSIS of return and a bigger negative NPV of \$10,496. The table below shows the same.

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FIXED INCOME ANALYSIS Mutual Funds Bond mutual funds have a relatively low return rate. In the last year, high yields bonds have averaged returns of 2.36%, 6.25% and 4.29% in the last 1 year, 3 years and 5 years respectively. The 5-year returns are lower than both corporate bonds and long-term government bonds which average 3.49% and 4.47% respectively. When you put into account the management fees and other taxations such as on sales, bond mutual funds are rather expensive. This is especially on long-term investments as some of the fees such as management fees are deducted on an annual basis (Morning Star). The fund’s composition is 91.14% bonds, 8.81% cash and 0.05% preference stocks. From the bonds 16.92% in the next one to 3 years, 26.78 in the next 3- 5 years and 26.54% in the next 7-5 years which ensures continues flow of cash flows in the near
FIXED INCOME ANALYSIS distant feature for dividends and reinvestments. Only 1.2% of the funds will mature in a year, 3% in the next 10 to 20 years and 0.48% in the next 20 to 30 years ( Y charts, 2018). In the last 5 years, the fund has averaged an annual return of 5.45%. This is the right rate to use due to the fund's tendency to invest in bonds average 3 to 7 years. The current market price of the Bond mutual fund is \$8.89 as of the close of business on 27th September 2018. This means Mr. and Mrs. Barrow can buy 33,708 shares and an expect cash flows averaging 16,500 annually which is still lower than the bond's rate- that is assuming everything remains constant.

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FIXED INCOME ANALYSIS References U.S Department of the Treasury. (2018). U.S Department of the Treasury . Retrieved from Treasury Direct Website: Y charts. (2018, September 27). Y Chart . Retrieved from Y Chart Website:
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