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    Realized Compound Yield: Bond A

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    kanye
    The document discusses two bonds, Bond A and Bond B, that have the same yield to maturity but different cash flow schedules. While both bonds have cash flows at times 0, 1, and 2, Bond B pays a coupon at time 1 that Bond A does not. This coupon for Bond B must be reinvested to make the time 2 cash flows for the two bonds comparable.

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    Realized Compound Yield: Bond A

    Uploaded by

    kanye
    8 views1 page
    The document discusses two bonds, Bond A and Bond B, that have the same yield to maturity but different cash flow schedules. While both bonds have cash flows at times 0, 1, and 2, Bond B pays a coupon at time 1 that Bond A does not. This coupon for Bond B must be reinvested to make the time 2 cash flows for the two bonds comparable.

    Original Description:

    Lecture 1(1).38

    Original Title

    Lecture 1(1).38

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    The document discusses two bonds, Bond A and Bond B, that have the same yield to maturity but different cash flow schedules. While both bonds have cash flows at times 0, 1, and 2, Bond B pays a coupon at time 1 that Bond A does not. This coupon for Bond B must be reinvested to make the time 2 cash flows for the two bonds comparable.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pdf or txt
    8 views1 page

    Realized Compound Yield: Bond A

    Uploaded by

    kanye
    The document discusses two bonds, Bond A and Bond B, that have the same yield to maturity but different cash flow schedules. While both bonds have cash flows at times 0, 1, and 2, Bond B pays a coupon at time 1 that Bond A does not. This coupon for Bond B must be reinvested to make the time 2 cash flows for the two bonds comparable.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
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    of 1

    Realized compound yield

    Bond A

    2
    FVA

    Bond B

    c
    FVB

    Suppose that the two bonds above have the


    same YTM
    For a given investment the time two cash flows
    will differ, since bond B pays a coupon at time 1
    That coupon will have to be reinvested to make
    the time two cash flows comparable

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