I would like to have an example of a common case of buying government bonds. (Wikipedia: it is issued generally with a promise to pay periodic interest payments and to repay the face value on the maturity date).

What is the maturity date (years I guess), how much is that period of "periodic interest payments", how much is that interest, and what is the "face value"?

A simple example of the most common case. Or at least a known case of such a transaction. Say for example one of the latest government bonds issuing of Germany or Spain.

Say for example I buy German government bonds at a maturity date of N years, with a periodic interest of M months, and with the interest at P percent each month. Replace N, M, and P with a known case. In case I spend 100,000 Euros for such bonds, how much do I get back? (periodically, in the end and in total)

I think such example would make it easier for the common people like me to understand how government bonds work.


1 Answer 1


Using an example from the US treasury's website you can buy a \$100 dollar face value bond that pays 3% annual interest semiannually for thirty years. That means you would get $100 \cdot 3\% / 2 = 1.5$ dollars every six months, and at the end of the thirty years you also get \$100. In total you would get $1.5 \cdot 2 \cdot 30 + 100 = 190$ dollars but as it is explained in the link in Jamzy's comment adding up dollars in this case is not very sensible, because dollars in different years have different value.
(If you disagree I would love to trade with you. For 1000 dollars today I will happily give you 1000 dollars 10 years from now.)
The price you pay for this bond is determined by auction. Using this you can calculate the yield of the bond. (Again, please see the explanation in the link.)
The answer would follow the same logic for €100,000. You can convert the euros to dollars or find a suitable European bond.


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