On page 29 of Volume 4 the text states “In general, for an upward-sloping yield curve, the immunization target rate of return will be less than the YTM because of the lower reinvestment return. Conversely, a negative or downward sloping yield curve will result in an immunization target rate of return greater than the YTM because of the higher reinvestment return.” So let’s say my target immunization RoR is 5%, 5 year time horizon, coupon paying bonds. If the yield curve is upward sloping then its implying fwd spot rates are going to be higher than today’s spot rates. So then I can reinvest my coupon proceeds into higher yielding securities and achieve a higher RoR. Reverse it and fwd spot rates are going to be lower than today’s spot rates. My coupons don’t generate sufficient reinvestment income to meet my target. Is that correct? What if I have a zero? I feel like the logic is missing some qualifiers. Thanks
Thanks - apologies for the re-post