Hey guys,
maybe you can help me understand i. I read this article from 2 days ago that insuring against against irish bonds has risen.
http://businessetc.thejournal.ie/in...ault-costs-more-now-than-ever-before-2010-11/
The say that t cost 5.25% to insure your bond against default and the interest on a bon is 7.25%.
An example:
it have 1,000,000 in bonds at 7.25% then that means you get €72,500 from the bond. say you get nervous and you want to insure it. it will then cost you €52500 to insure against a default.
So really what you are making in profit is €20000 which is 2% of your money.
It is this correct? if so why you bother putting your money in there when you could put it in a bank at 2%.
Is it because people think the government is safer than a bank so better guaranteeing getting it from the government safely than from a bank that might default?
thanks for reading
maybe you can help me understand i. I read this article from 2 days ago that insuring against against irish bonds has risen.
http://businessetc.thejournal.ie/in...ault-costs-more-now-than-ever-before-2010-11/
The say that t cost 5.25% to insure your bond against default and the interest on a bon is 7.25%.
An example:
it have 1,000,000 in bonds at 7.25% then that means you get €72,500 from the bond. say you get nervous and you want to insure it. it will then cost you €52500 to insure against a default.
So really what you are making in profit is €20000 which is 2% of your money.
It is this correct? if so why you bother putting your money in there when you could put it in a bank at 2%.
Is it because people think the government is safer than a bank so better guaranteeing getting it from the government safely than from a bank that might default?
thanks for reading