O'Reilly logo

BOND MATH: The Theory Behind the Formulas by Donald J. Smith

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

Horizon Yields

The receipt of regular coupons, usually semiannually, makes horizon yield (or total return) analysis particularly important. With zero-coupon bonds in Chapter 2, we saw that selling prior to maturity has a dramatic impact on an investor's holding period rate of return. It depends on the yield at the time of sale, which indicates the buyer's required rate of return to hold the bond for the remainder of the time to maturity. With coupon bonds, horizon yield analysis includes all of that plus the interest rates at which coupon payments can be reinvested. This can be ex ante analysis using projected future reinvestment rates, or ex post analysis using actual realized rates.

We really will not be able to do justice to the issue of coupon ...

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required