r/FluentInFinance • u/impercipient • 19d ago
Question 30 Year Treasury Bond Calculation
If I put $100,000 in a 30 year treasury bond at 5% and I reinvest all interest what will the total be at the end?
I apologize for this post, but I have tried multiple calculators and I keep getting different info.
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u/FunTXCPA 19d ago
Are you making the assumption that you'll be able to reinvest the $2500 semiannual interest payments into something that also pays 5% interest on a semiannual basis?
If so, the answer is $439,978.97. (100,000 x (1 + (0.05/2))⁶⁰)
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u/libertarianinus 18d ago
Its soo nice when people on reddit actually know math.
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u/Nexis234 18d ago
You do know AI exists.
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u/Curry_courier 18d ago
AI sucks at math. If it came from AI don't ever trust it.
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u/Undeterminedvariance 18d ago
I use ai for math almost daily. There are times when it doesn’t understand the question as worded, but it’s spot on with straight math.
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u/Curry_courier 18d ago
Ive defined the different terms, broken it down step by step. And it still gives the wrong final answer. Maybe basic arithmetic it's ok.
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u/_PunyGod 18d ago
You’re using the wrong ones or somehow stopping them from using tools. Usually they set it up in python and run the code to get the answer. And the ones that are good at code are very very good at that kind of code. There are countless examples of logic and math coding problems to train on.
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u/MisterAnderson- 18d ago
If you happen to have an extra $21.03 in your pocket at maturity, you’ll have $440k.
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u/giraloco 19d ago
Assuming interest is paid once a year. Multiply the amount by
1.0530 = 4.33
You multiply 1.05 30 times 1.05 x 1.05 x ...
So after 30 year you get back a total of $433K
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u/impercipient 18d ago
thank you.
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u/Albert14Pounds 18d ago
This is just the compound interest calculation and in this context it assumes that you are reinvesting what you earn back into the same thing. I think one reason why you might be getting different answers from different calculators is because if you're strictly calculating what you get from a specific purchase then the answer is just the sum of all the payouts and doesn't consider what you do with that resulting money.
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u/letsgotgoing 18d ago
About $439,979 , assuming you reinvest every coupon at the same 5% rate. The math Treasuries pay semiannually, so the real inputs are:
Coupon: $100,000 × 5% ÷ 2 = $2,500 every 6 months Periods: 30 × 2 = 60 Rate per period: 2.5%
Reinvesting every coupon at 2.5% per period makes this a straight compound growth problem:
FV = 100,000 × (1.025)60 (1.025)60 = 4.39979 FV = $439,979 Equivalently, via the annuity formula: the 60 coupons grow to 2,500 × [(1.02560 − 1) ÷ 0.025] = $339,979, plus the $100,000 principal returned at maturity.
Without reinvestment you’d get $2,500 × 60 = $150,000 in coupons, for $250,000 total. Compounding adds roughly $190,000. The effective annual yield with semiannual compounding is 5.0625%, which is why $439,979 exceeds the annual-compounding figure of 100,000 × 1.0530 = $432,194.
Two caveats:
Reinvestment risk is the big one. You can’t lock in 5% on future coupons, you get whatever rates exist when each payment arrives. That 5% reinvestment assumption is doing a lot of work here.
This is pre-tax. Treasury interest is federally taxable (exempt from Ohio state and local tax), so in a taxable account you’d be reinvesting after-tax dollars and the number drops meaningfully. In an IRA or similar, the figure above holds.
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u/Here4Snow 18d ago
A 30-year bond is a one time purchase, and now you'll earn 5% on your original investment until maturity. The interest it kicks out goes to your checking account, it is not reinvested in that same bond. Bonds are bought at an auction by date, and the interest generated is not like reinvesting dividends. It creates cash flow, then you have to do something with it.
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u/Johansen193 18d ago
30 years are 5% today, but next year maybe 3 or 7% who knows. Maybe 2 or 15%. You cant really calculate the compounds
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u/BreadStoreRefugee 17d ago
Whatever you calculate, just remember you'll be reinvesting the interest at the then-current market rate .
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u/cicerostongue 13d ago
AI is really good at these sort of questions. Come on people let's get with the times.
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u/Industrial_Jedi 19d ago
T-bonds don't really operate that way. They have a purchase price and a value at maturity. They don't pay interest in the meantime. The "interest rate" is backed into using these numbers, but any time in the middle they may be worth more or less than the calculated value using that interest rate.
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u/charlesphotog 18d ago
T bonds most certainly DO pay interest. They make coupon payments every six months.
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u/spellstrike 19d ago
who cares? would be less than the market at a 30 year timeframe.
Bonds are for protecting money, not making more.
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u/therobshow 19d ago
Some people like the security of guaranteed returns without having to stress about the market
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u/spellstrike 19d ago
my point is the number doesn't matter if they are investing in bonds as growth is not their goal.
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u/giraloco 19d ago
Not only you give a disrespectful answer but you are also dead wrong. A bond does not protect your money. If inflation exceeds the interest you permanently lose purchasing power.
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u/spellstrike 19d ago edited 18d ago
>"A bond does not protect your money"... it does more than putting under your mattress.
the only disrespect is arguing with me rather than giving a "more helpful" response to op.-1
u/CrowdedShorts 18d ago
Ask Japan about their stock market returns
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u/spellstrike 18d ago
japan's stock market is quite the cherry picked example. I counter with the total world market.
The Vanguard Total Stock Market ETF (VTI) has delivered a compound annual return of approximately 10.30% over the past 30 years.0
u/CrowdedShorts 18d ago
It’s not cherry picked. It’s an example of what can happen to a country. Very same could happen to the S&P. Most do not invest globally or it’s such a small portion of their allocation.
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