Why is this bond trading at $50.620?

JP Morgan Chase GLOBAL MTN ZERO CPN SER E INDEX-LINKED (RETURN ENHANCED) bond is trading at $50.620. It is due to mature on 4/23/2008, i.e. in 5 months from now. Its offering price is $100, i.e. at par.

Any of you hold any investment in this bond series? I am suprised by this low current price. I cannot believe that if I buy this bond now for $50.620, I will make $48 in return per bond in 5 months from now, thats a whopping 98% return on my money.

It seems too good to be true. Whats your take on it?

I found this issue on nasdbondinfo.com, which is now changed to FINRA. The link is below:

http://cxa.marketwatch.com/finra/BondCen...

It is an Index Linked bond.

Most Index Linked bonds pay coupons based on the index and then pay Par at maturity.

A zero coupon bond does not pay any coupons -- so the only way they could link this bond to an index is by varying the final payment. I suspect that this is a bond that pays the par amount of the bond times some index value. This means that it is highly unlikely that you will make a 98% return on your money.

I seriously suggest that you get the prospectus before you buy.

Something is not right there. Where did you get the quote?

If it is a derivative based bond, made up of mortgage backed instruments, The actual principal return may be suspect.

A lot of mortgage based securities cannot be sold at any price right now...the Big companies like JP Morgan, Chase Manhattan etc are taking writedowns of 100's of billions of dollars on worthless paper.

I wouldn't touch this unless I was extremely rich and wanted a gamble on descretionary money.

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