Two investors in the NSE at this bear period take the following investment actions: -

(a) Bond-Investor
He/She bought into an over-subscribed 'risk free' infrustructure bond and was expecting 6.25 % risk free return on the first semi-annual payment based on a 12.50% p.a payable semi-annually on the outstanding principal amount.

This presents a 6.25% semi-annual return - assume a June payment. Decides to retain his investment here for another 18 months.

(b) KCB-Investor
Bought KCB shares at the beginning of this week at Ksh. 15.35/= looking for the dividend payout of Ksh. 1/= per share on the payment date 29-May-2009.

This presents a guaranteed 6.38% return,at the same bond semi-annual date,inclusive of a maximum 2.1% buy transaction cost. Also decides to retain his investment here for another 18 months.

Your thoughts
What do you think are the prospects of these two investors at the close of June and after the subsequent 18 months?

KCB never bought credit default swaps....so dont compare to HBOS etc

I would rather put my money into KCB


Business opportunities are like buses,there's always another one coming

Your argument relies on selling KCB xd at the buying price. Will this be the case? I rather think not,I suspect it will be higher.

Assumin longterm investin? Minimum holdin 1year? Otherwise u could trade on trends of both bond n kcb share.

The race is not always to the swift..nor the battle always to the strong..nor food always to the wise..nor riches always to the intelligent..favor is not always to the skilled..or learned..but time and chance happens to all. Ecl9:5..

The case presented at the 6 month drawline only offers the guranteed. The bond has a guaranteed semi-annual payment whilst KCB has a guaranteed dividend payment..the 18 month window period is to allow for the subsequent possibilities..