Chapter 15
Total Realized Compound Yield
Realized Compound Yield Over the Bond’s Life
In Chapter I, we proposed the concept of total realized compound yield as an important value measure for investors seeking full compounding over the life of a long-term bond. It supplements yield-to-maturity in two ways: by including interest-on-interest for the full life of the investment at various assumed rates, and by including, where pertinent, interim price fluctuations. Thus, every bond offering can be related to four interest rates: 1) the coupon rate; 2) the yield-to-maturity (which can always be restated as the price); 3) the assumed reinvestment rate; and 4) the realized compound yield which is derived from the other three rates. The realized compound ...
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