11-03-15-Calculating Yields To Maturity

11-03-15-Calculating Yields To Maturity - Calculating...

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Calculating Yields To Maturity March 15, 2011
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Yield To Maturity This Yield Is Easy To Calculate, Since It Is The Yield (Sometimes Called The Internal Rate of Return) Which When Used In The Formula For Net Present Value Finds That That Value Is Just Equal To The Current Market Price. In Contrast, The Current Holding-Period Yield, While Essential For Making Portfolio Decisions, Can Not Be Calculated, Since It Depends On The Expected Value Of The Asset At The End Of The Holding Period. This Value Is Uncertain.
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Theories Of The Yield Curve The Liquidity Theory Of The Yield Curve Has One Great Strength: It Explains Why The Yield Curve Is Typically Upward Sloping. It Does This By Arguing That Shorter-Term Market Instruments Have Greater Liquidity, And Therefore Greater Liquidity Premia. But It Is Hard To Generate A Theory Which Explains The Sizes, And The Variation In The Sizes, Of These Premia Over Time.
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Preferred Habitat) Theory This Is Another Theory With Limited Explanatory Power. The Argument Is That The Yields On Certain Bonds Deviate From Those Of Others Because They Have Particularly Attractive (Or Unattractive) Maturity Dates. Specifically It Views Bonds Of Different
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This note was uploaded on 07/16/2011 for the course ECON 2154 taught by Professor Boyer during the Winter '10 term at UWO.

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11-03-15-Calculating Yields To Maturity - Calculating...

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