Interest Rate Risk and Return
Free CFA Level I lesson in Fixed Income. 10 min read, ~1,442 words.
Three return sources: coupon payments, reinvestment of those coupons, and capital gain/loss if sold before maturity. Holding to maturity removes the third. Macaulay duration = weighted average time to cash flow receipt, weights are PV(CFt) / Price, and those weights sum to 1. Coupon bonds: MacDur < maturity; a zero-coupon...
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What this lesson covers
- Content
- Example 1
- Example 2
- Common Mistakes
- Check Your Understanding
- Exam Shortcuts
Learning objectives
- interest rate risk and return
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