No point in cashing bonds annually
PA Wellington A Reserve Bank’ spokesman said yesterday that in-flation-proof bond holders who believed they were gaining by cashing in their bonds each year and reinvesting the larger amount to gain a bigger return the following year w'ere in error. Commenting on a newspaper report which said it was known that many people were doing this, the spokesman said that they overlooked the fact that the premium was calculated
over a period of several years. .He said the calculations were made on the Consumer Price Index, which gave a compounded result over a period of years. "In fact.they could suffer a loss of a month's interest and premium because of the necessary notice that has to be given for cancelling the bonds." He said the 2 per cent interest on the investment was very small and did not compensate for the loss of the compounding part of the bond.
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Press, 5 June 1982, Page 19
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155No point in cashing bonds annually Press, 5 June 1982, Page 19
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