3 ms·

Sure, but in this case wouldn't the 'prevailing rate at the time the cash flows were received' generally have been higher than the original coupon? Presumably

• stygiansonic 12y ago
  Yes, I believe your original point that bonds would have been a better investment than gold still holds. But the way to compare that would have been to look at the "total return", i.e. assuming coupons had been reinvested, etc. (For example, there is an S&P 500 total return index whose growth reflects the theoretical reinvestment of all received dividends) I don't know if there is such a metric for these gilts, but if there is, then that total return rate would be more or less directly comparable to the CAGR for gold. (Side note: Total return may not always apply in the real world, as the cash flows received may not be sufficient for reinvestment. Simple example: A bond with a face value of $1,000, coupon of 5%, payable each year. Assume that new bonds are issued each year with the same face value and that the face value is also the minimum purchase amount. Your yearly coupon of $50 from the original bond is not enough to buy new bonds and so it remains uninvested. Things like mutual funds/bond funds/bond ETFs attempt to solve this problem by allowing you to reinvest small amounts, albeit at the expense of charging you a management fee.)