P339 in volume 3 of readings, "for an upward-sloping yield curve, the immunization target rate of return will be less than the YTM because of the lower reinvestment return. " upward-sloping----Long-term rate is greater than short-term one, but I didn’t understand the mechanism here. Who can explain?
Passage of time - with each reinvestment you are traveling down the yield curve from left to right. Say you have annual coupon paying bond of maturity 10 years. First coupon will require reinvestment for nine years. The second-to-last reinvestment will require reinvestment for 1 year.
I’m confused on this one… I would think in an upward-sloping yield curve, this is beneficial for reinvestment return, so why is it saying it’s less?? …have to review that page tonight…
this has been discussed earlier. You can try search.