Determinationofbondyields 1 yieldtomaturityytm 2

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Unformatted text preview: ance of determining the investment horizon 3. Key strategy for immunizing the yield on a bond portfolio All Rights Reserved Dr David P Echevarria 5 BOND VALUATION F. Determination of Bond Yields 1. Yield to Maturity (YTM) 2. Current Yield 3. Tax treatment of gains and loses a. Premiums b. Discounts F. Using Expectations to Manage Total Returns on Bond Portfolios 1. If you know were interest rates are going you know where bond prices are going 2. Riding the yield curve or betting on the movement of interest rates All Rights Reserved Dr David P Echevarria 6 BOND PORTFOLIO MANAGEMENT A. Use of Duration as an Immunization Strategy "A portfolio of bonds is immunized from interest rate risk if the duration of the portfolio equals the desired investment horizon" Fisher and Weil 1. Requires a known...
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