Chapter 5
The Price Volatility of Premium Bonds, Par Bonds and Discount Bonds
The yield analysis in Chapter 4 will suffice to guide that very special investor who feels the need to check his bond market values only once every few years. However, few investors now cling to this rigidly long-term orientation. In fact, most bond portfolio managers pay close attention to interim movements in interest rates and the corresponding bond price reactions. In the context of this discussion, this means that the intermediate term price potentials of premium, par and discount bonds are an integral consideration in selecting the best instrument for a given portfolio. Since the price potentials of these three issues are very different, they serve to qualify ...
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