Distressed Sale

Finance allah shmoop what is a deep discount bond d

like down here where the whales go for a bit

of peace and quiet Look around thirty two cents on

the dollar twenty three cents on the dollar Ah and

here's a twelve center peace quiet so way up there

Yeah at the surface where the flying things hang out

a lot you know up there that's par one hundred

cents on the dollar crowd but down here lives the

deep discount bond crowd and we have our own set

of rules So who are we Well we're the shipwrecks

the fallen overboard phone companies that didn't work where Puerto

rico and where Greece where the failed the losers les

miserables well this guy used to yield five percent Now

he trades for just twenty cents on the dollar He's

so angry because well he thinks he should be up

there on the surface at par But no the street

has thrown him out and well he sank No michael

phelps there they don't believe that newspapers on paper are

ever going to be a thing again So ironically they

don't even want his paper sad while he thinks he's

a big bargain He's Still paying his coupon five cents

on the hundred cents on the dollar schedule five percent

Yeah only now you khun by that five cents a

year for one fifth of the price Twenty cents That's

right twenty cents for a dollar of par or you

get five times the yield Yep five times five percent

yield or twenty five percent When you're buying that one

hundred cents on the dollar our value for only twenty

cents Yeah crazy high yield if he pays if it

continues to yield the alec he may stop We don't

know Well oops Here comes another Who a ten cent

on the dollar ouch coupon here is six percent So

the yield well if it pays is now sixty percent

crazy crazy high and clearly nobody believes the coupons going

keep in there but deep discount bonds down here have

another strange thing that people wake up They're in the

sun shining land of par Don't think about appreciation meaning

that well let's say that sears reinvents itself and becomes

a coffee selling kid love an amusement park and the

ten cent on the dollar bonds which paid sixty percent

Yield Now Yeah here's the math Well what happens if

they go all the way back up to par Well

you've made your interest of course but you'll also make

a ten times the money on the investment yourself right

invested a dime and go back to pa ra tha

dollar well And then everyone will be singing singing under

the park under the par do dahlia under the sea 00:02:36.728 --> [endTime] and forget that