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Is the yield to maturity on a bond the same thing as the required return?
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- How does one determine the required rate of return of a bond, the cash flows of a bond and the value of a bond? How do you determine if a bond is a good investment? Are long-term bonds riskier than short-term bonds? Explain and Discuss.What are the differences between stocks and bonds in terms of predicted future payments? Which sort of investment is regarded to be riskier (stocks or bonds)? Given your knowledge, which investment (stocks or bonds) do you believe is often referred to as "fixed income"?What is the mispricing if an Equity Premium exists? Should more bonds or more equity be added to a portfolio? Please provide references.
- How Interest Rates Affect Bond Prices. Explain the impact of a decline in interest rates on an investor’s required rate of return.How would bond convexity be used as a risk-management tool in managing a bond portfolio? How does bond duration and bond convexity complement each other in measuring a bond portfolio’s interest rate risk?When you have a fixed investment horizon, it is important to maximize your earnings. You must understand the risks and returns of the security and the risk factors that can affect the price of the bond. If an investor has a fixed investment horizon, what type of security can be used to minimize both the price risk and the reinvestment risk? Does this security protect the real payoff? Explain.
- Do bondholders fare better when the yield to maturityincreases or when it decreases? Why?How would bond convexity be used as a risk-management tool in managing a bond portfolio?How do stocks and bonds differ in terms of the future payments that they are expected to make? Which type of investment (stocks or bonds) is considered to be more risky? Given what you know, which investment (stocks or bonds) do you think commonly goes by the nickname “fixed income”?
- Explain the differences between a bond's yield to maturity (YTM) and its yield to call (YTC). Is there a reason why the return to the investor would alter if a bond is called? Please provide justification for your response.What’s the logic behind the bond-yield-plus-risk-premium approach?why is yield to maturity more important than coupon rate when investing in bonds?