What High Denominational Treasury Bonds Looke Like (99% of us will never see one in your life time)

Here you go:
[atsimg]http://files.abovetopsecret.com/images/member/de150b1602b4.jpg[/atsimg]

Lovely isnt it? 1,000,000 dollars in the form of paper. mmmmm

[edit on 6/12/2009 by Tentickles]

And a bearer bond, no less. That's as good as cash once it has been vested. Hmm.. what could I do with that much money?...Well, give a few months and I'll be able to buy something off the value menu at Wendy's. *smirk*

What are the 16, 38,125.00 little tags hanging off of it?

It looks like somebody has spent half of them, but it adds up to 1.22 million dollars.

But you don't spend bonds you trade them in for cash when it matures right?

And that is a 5 year bond.

Those tags are the interest coupons. The bond is a 30 year treasury note. Each coupon is a payment of the 7% compound interest over the life of the note.

reply to post by rogerstigers


Okay I see it now it was issued in 1977, and it expires in 2007.

So what are the interest coupons for?

Originally posted by Hastobemoretolife
reply to post by rogerstigers

 

Okay I see it now it was issued in 1977, and it expires in 2007.

So what are the interest coupons for?

Collect interest, the bearer of the bond exchange each coupon once a year until maturity for cash (dollar, money).



[edit on 2009/6/12 by reugen]

Each coupon has a date on it when it can be cashed in for an interest payment. Or you can hold on to them and cash them in at maturity if you want your money sitting around doing nothing.

Once all of the coupons are cashed in and the bond matures (in this case between Feb 15, 2002-07) you get your million dollars back.

The thing is, a million dollars today doesn't buy you what a million dollars bought you in 1977.

If one was to adjust for inflation my guess is that this person probably lost more money (purchasing power) than they received even with a hefty 7 + 5/8ths percent interest.

It's a "safe" way to invest only if you want to get poor over a thirty year period IMO. Better to buy hard assets that generate a revenue or keep their relative inflation adjusted value over the same period of time.
.

I just did a quick and dirty calculation using this tool: The Inflation Calculator

If we look at the principle only (and ignore inflation adjustments to each of the coupon amounts on the dates they are cashed in) we have the following result:

What cost $1 000 000 in 1977 would cost $3 384 974 in 2007.

If we add up all of the coupons we get a total of $915 000. So this person gets a total of $1 915 000 whereas if they wanted to simply keep up with inflation they fell behind by $1 469 974.

Again you would have been better off investing in a business making revenue or hard assets.

Just for fun.

The price of gold in 1977 was around $150: source

Again adjusting for inflation: What cost $150 in 1977 would cost $507.75 in 2007.

The price of gold in 2007? Between $650 and $830.

Which is the better inflation adjusted investment?
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First time I saw one of these was in DC at one of the museums on the mall. They had 1-10-100 million dollar notes and other denominations of all types.

Zindo

Just thought about it. It was interesting that you posted this in such close proximity to [yrl=http://www.abovetopsecret.com/forum/thread471873/pg1]this thread[/url]. Good timing, eh?

Originally posted by Gools
I just did a quick and dirty calculation using this tool: The Inflation Calculator

If we look at the principle only (and ignore inflation adjustments to each of the coupon amounts on the dates they are cashed in) we have the following result:

What cost $1 000 000 in 1977 would cost $3 384 974 in 2007.

If we add up all of the coupons we get a total of $915 000. So this person gets a total of $1 915 000 whereas if they wanted to simply keep up with inflation they fell behind by $1 469 974.

Again you would have been better off investing in a business making revenue or hard assets.

Just for fun.

The price of gold in 1977 was around $150: source

Again adjusting for inflation: What cost $150 in 1977 would cost $507.75 in 2007.

The price of gold in 2007? Between $650 and $830.

Which is the better inflation adjusted investment?
.

in 77' how much did the buyer pay for these and can we be sure

the reason i ask is because i believe someone in 77 would pay 500,000 for a 1,000,000 bearer bond that matures between 02 and 07....

given your "dirty" calc's.....that would = aprox 1.7 million inflation adjusted $ in 07...

now if it pays 1 mill plus interest payments totaling 915,000 or 1,915,000 which is a net gain with inflation.......i.e a decent investment

but i could be wrong about the purchase price.....


also (playing devil's advocate ) your gold example would be a poor choice adjusted for inflation....if compared to the gold price in 2002 (the first year the bond was refundable)....which was approx $300.(for gold)...............while 150$ in 1977 = 442$ in 2002...........it took until 2005 until gold actually caught up and surpassed 150$ worth of 1977 dollars

[edit on 13-6-2009 by cpdaman]

As a new issue , that bond would have been purchased at par. Basically a 30yr 1MM dollar loan to the gubmn't , drawing an annual fixed rate of interest...7\5/8 , payable every 6mo (60 coupons). Not too shabby.....but...but wait a minute.....lets remember who we're dealing with here....

What's notable with respect to that particular issue , CUSIP# 912810 BX 5 , is that it was a "callable" security. Essentially , Uncle Sam held an option on that bond...meaning , the right to force redemption at face value "on and after February 15, 2002" , with no further obligation to the bond holder (see small print).

In other words , any entity intending to hold that bond to maturity , and clip the full 60 coupons @ $38,125.00 per , got squicked on February 15, 2002 to the tune of $419,375.00....11 coupons

October 15, 2001

1. Public notice is hereby given that all outstanding 7\5/8\ percent Treasury Bonds of 200207 (CUSIP No. 912810 BX 5) dated February 15, 1977, due February 15, 2007, are hereby called for redemption at par on February 15, 2002, on which date interest on such bonds will cease.

Notice of Call for Redemption

Now , a simple-minded , sweaty-palmed , wild eyed Gold-Bug might consider value in terms of purchasing power....

In 1977 , at an average price of $150 oz , $1MM would have purchased 6,666 ounces of Gold.

In 2002 , at an average price of $300 , that same 1$MM would only net 3,333 ounces.

Hey , in mid-2009 we're down to just over 1,000


GL

[edit on 14-6-2009 by OBE1]

Originally posted by Gools
If we add up all of the coupons we get a total of $915 000. So this person gets a total of $1 915 000 whereas if they wanted to simply keep up with inflation they fell behind by $1 469 974.

There should be 60 coupons (semi-annual interest payments) totaling $2,287,500 in interest over the life of the bond. Not bad for a low risk investment.

interesting stuff......thanks for breaking it down OBE 1

that is why the rate of intrest was so aggressive.....it was a callable bond

also if there is 60 coupons of 38,125 each (and as you say it starts paying interest at 6 months)

we would then have to calculate the inflation adjusted value of the bond's (intrest payments) i.e income stream starting in 77..........we could do this buy adding the yearly payment (76,250$)

so that adjusted to 2002 dollars would be 123,359.00 (only pays after 6 months so first year has only 1 interest payment)

the 78 intrest payments would= 210,389.00

...........188K
.....166k
.....150k
....142k
137k
132k
127k
125
120
115
110
104
100
97....95...92.....90...87....85...84....82....79...76.5 = aprox 2.9 million (in my head math).......plus the 1,000,000 principal.........so 3.9 million (but that assume's the intrest payments were re-invested into hard assets).......

[edit on 14-6-2009 by cpdaman]

You lost me there cp.

mythatsabigprobe (Hi mythahtsabigprobe!) , calculated the nominal coupon value. The 1MM investment would have earned $2,287,500 if held to maturity....ex-incremental inflation adjustments.

To each his own , but as Gools pointed-out , against Gold , that investment was a loser.

The 7\5/8 interest rate was in-line with yields on the date of issue. Callable bond , but no premium.

Historical


GL

reply to post by Gools


True, but to be fair its technically 2,143,750.00

I know if I had a million or two invested I could live peacefully off of the 38k/yr while pursuing some leisurely activities .... like fishing. Lots and lots of fishing. With some cold PBR, and a little boat.

*sigh*

Cool thread.

I know there are US paper bonds with values greater than $1 million...anybody have any pics of them or at least know whose faces are on them?

Here is a blog article about two men recently caught in Switzerland with $124 BILLION of "undeclared, possibly counteirfit" US bonds. If you scroll down there is a pic of some of the bonds but the detail is not so clear. According to one of the many links off that page:

The seized notes include 249 securities with a face value of $500 million each and 10 additional bonds with a value of more than $1 billion, the police force said on its Web site. Such high denominations would not have existed in 1934, the purported issue date of the notes, Mecarelli said.

Well good lord, does that mean they do in fact exist NOW? The very idea of a single piece of paper worth $500 million or $1 BILLION seems totally insane to me. Are there really notes like this out there? Whose face is on them?




[edit on 6/14/09 by silent thunder]

I had some Swiss $1000 notes the other day.
The exchange rate to Australian dollars was about $1100 AU for one $1000 swiss note.

It was the largest denomination I have ever handled, but the one's presented by the OP trump them by far.

Oops.

Made a mistake.

I added up the coupons by counting the ones that filled the empty space in the pic for a total of 30 without noticing they were numbered up to 60.

Thanks for the corrections.
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