Investing - Theory, News & General • How to evaluate TIPS secondary market purchase

I recently purchased $50K worth of TIPS on the secondary market on Fidelity. Here's how I evaluated the purchase. Since this is my first time purchasing on the secondary market, I want to know if my calculations are correct:

I purchased CUSIP 912810TY4, which you can see here: https://www.treasurydirect.gov/auctions ... =912810TY4. It is a 30-year TIPS and coupon rate is 2.125%.

• Step 1: Evaluate what the security would be worth at maturity, assuming no inflation:
  $50,000 @ 2.125% for 30 years would be worth $93,957.638.
  JavaScript formula:

  Code:

  50000 * Math.pow(1.02125, 30) 

• Step 2: Lookup current yield on Bloomberg: https://www.bloomberg.com/markets/rates ... t-bonds/us
  When I looked, the yield for 30-year TIPS was 2.01% on Bloomberg.
• Step 3: Calculate the price to pay based on the yield reported by Bloomberg, such that at maturity you get the same amount as Step 1.
  Note that there are 29.4 years remaining.
  JavaScript formula:

  Code:

  93957.63800 / Math.pow(1.0201, 29.4)

  The answer is $52,340.192.

The amount I actually paid on Fidelity is $52,569.20, which is close.

Am I calculating this correctly? I plan to buy more TIPS on secondary market, so I want to fix any calculation mistakes before my next purchase.

Statistics: Posted by petilon — Sun Oct 06, 2024 5:56 pm — Replies 2 — Views 180

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