Wikipedia:Reference desk/Archives/Miscellaneous/2020 July 25
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July 25
[edit]Bond coupons
[edit]Bank interest was quarterly, less than 360 or so days isn't a bond I think, how did bond coupons become 6 months? I suppose getting it twice yearly is a better honesty test than yearly so why not quarterly like the stockholders, who aren't even paid unless the debt is? Sagittarian Milky Way (talk) 14:49, 25 July 2020 (UTC)
- It isn't clear from your question which financial institution or jurisdiction you reference. “Bank interest” can refer to many different kinds of financial instruments, and some will pay interest daily, others annually. Bonds are contracts drawn up between borrowers and lenders (banks are not necessary), and so can have any interest payment (“coupon”) period that is agreed upon. There is no actual “honesty test” in finance. DOR (HK) (talk) 15:04, 25 July 2020 (UTC)
- Common peoples' bank accounts were quarterly when interest tech was low enough right? Back when accountants were very busy between interest periods with (electro-)mechanical adders or pencils or something. I know what a bond is, if it has a coupon 6 months is the most common right? Exact date might not be 6 months but 180 days or 26 weeks or maybe 183 days or another system, each system with arcane possible permutations of weekend, holiday and/or leap day adjustments but about 180 to 184 days is more common than about half that right? As far as I'm aware a bond that matures in less than about 360 days is not a bond but something else like commercial paper or a Treasury bill. Am I wrong? Well paying the coupons is proof you can pay them, more frequent review of whether to downgrade your bond to D can't be bad right? I'm not sure what if anything even an unlisted private company's executives could legally gain with a few more months before they default though, do they have to like.. tell anyone they won't be able to pay in advance? Is it insider trading or fraud if they try to sell securities of the company that only they know for sure will default in a few months even if they're unlisted? Sagittarian Milky Way (talk) 00:35, 26 July 2020 (UTC)
- Well, when I was a common person with a bank account :-), as I recall I was paid interest every 6 months. But I don't have my old passbooks from before about 1990, and by that time the high inflation around 1980 had led to monthly interest payments. --174.89.49.204 (talk) 03:04, 26 July 2020 (UTC)
- I'm sure interest tech had progressed to automatic computers by 1980. No more labor-intensive work between business hours when the quarter or half-year changed. Sagittarian Milky Way (talk) 14:20, 26 July 2020 (UTC)
- I recall computing compound interest as an assignment in Fortran programming class (c. 1972). 107.15.157.44 (talk) 16:00, 26 July 2020 (UTC)
- I'm sure interest tech had progressed to automatic computers by 1980. No more labor-intensive work between business hours when the quarter or half-year changed. Sagittarian Milky Way (talk) 14:20, 26 July 2020 (UTC)
- Well, when I was a common person with a bank account :-), as I recall I was paid interest every 6 months. But I don't have my old passbooks from before about 1990, and by that time the high inflation around 1980 had led to monthly interest payments. --174.89.49.204 (talk) 03:04, 26 July 2020 (UTC)
- Common peoples' bank accounts were quarterly when interest tech was low enough right? Back when accountants were very busy between interest periods with (electro-)mechanical adders or pencils or something. I know what a bond is, if it has a coupon 6 months is the most common right? Exact date might not be 6 months but 180 days or 26 weeks or maybe 183 days or another system, each system with arcane possible permutations of weekend, holiday and/or leap day adjustments but about 180 to 184 days is more common than about half that right? As far as I'm aware a bond that matures in less than about 360 days is not a bond but something else like commercial paper or a Treasury bill. Am I wrong? Well paying the coupons is proof you can pay them, more frequent review of whether to downgrade your bond to D can't be bad right? I'm not sure what if anything even an unlisted private company's executives could legally gain with a few more months before they default though, do they have to like.. tell anyone they won't be able to pay in advance? Is it insider trading or fraud if they try to sell securities of the company that only they know for sure will default in a few months even if they're unlisted? Sagittarian Milky Way (talk) 00:35, 26 July 2020 (UTC)
- It isn't clear from your question which financial institution or jurisdiction you reference. “Bank interest” can refer to many different kinds of financial instruments, and some will pay interest daily, others annually. Bonds are contracts drawn up between borrowers and lenders (banks are not necessary), and so can have any interest payment (“coupon”) period that is agreed upon. There is no actual “honesty test” in finance. DOR (HK) (talk) 15:04, 25 July 2020 (UTC)
Information that is required to be disclosed by senior executives varies by jurisdiction and the nature of the company. US listed companies are required to reveal information that may affect their share prices (and bond prices). Unlisted companies are subject to different rules, but in general borrowing money (issuing a bond) when you know you won't be able to pay it back is fraud, and using newly issued bonds to pay back older bonds may be considered an illegal pyramid scheme. DOR (HK) (talk) 19:42, 27 July 2020 (UTC)
- What if they thought they would not or at least might not default but unexpected event and now the revenue won't start? Do they have to tell that before selling stonk or bond that they had? Sagittarian Milky Way (talk) 03:27, 28 July 2020 (UTC)
- If one doesn’t warn the market of potential price sensitive information, the SEC tends to react with fines and possibly a ban on holding positions of responsibility in listed companies, in the future. Loss of large amounts of money, and future earnings, tends to dampen down enthusiasm for such behavior. DOR (HK) (talk) 01:24, 30 July 2020 (UTC)