I had this highlighted in the CFAI book, page 29 from SS9 and I don’t understand it. “For an upward sloping yield curve, the immunization target rate of return will be less than the yield to maturity because of the lower reinvestment return. Conversely, a negative or downward-sloping yield curve will result in an immunization target rate of return great than the yield to maturity because of the higher reinvestment return” What does that mean?
This was also a blue box question
Bump. Can anyone shed some light on WTF the above quote is saying?
This has to do with the reinvestment rate, right? We discussed this quote 2 months ago.
found the link … it was in February (!): http://www.analystforum.com/phorums/read.php?13,1113713,1113713#msg-1113713
An upward sloping yield curve means the shorter maturity yields are lower than the long term rates. You will be reinvesting your coupons @ progressively shorter maturities which gives you a lower rate of return. Make sense?
Neveruse_95%_everagain Wrote: ------------------------------------------------------- > found the link … it was in February (!): > > http://www.analystforum.com/phorums/read.php?13,11 > 13713,1113713#msg-1113713 Muchas gracias…I’m only on here for about a month each year, so a February thread would’ve been missed… Thanks again.
no problem… funny to think I was actually posting stuff in February, I must have zero life : )
ahhh, thats awesome…I was clueless on this one. bravo, bravo…
Awesome, that’s been bugging me for a while but I never asked about it. Thanks!