March 15, 2018

Download e-book for kindle: All About Bonds, Bond Mutual Funds, and Bond ETFs by Esme Faerber

By Esme Faerber

ISBN-10: 0071544275

ISBN-13: 9780071544276

ISBN-10: 0071544283

ISBN-13: 9780071544283

Access the extraordinary strength of bond making an investment!

Bonds have come a ways in recent times. not only a really secure and safe funding, bonds now supply the potential of capital appreciation as well as curiosity source of revenue. All approximately Bonds, Bond Mutual money, and Bond ETFs is the foremost to realizing either conventional and new forms of bond investments.

This exact yet available advent covers every little thing from uncomplicated bond features to fixed-income funding strategies. you are going to achieve an intensive schooling on such themes as yield, liquidity, length, convexity, valuation, and rising markets and locate the solutions to many questions a bond investor will ask, such as:

  • What percent of my portfolio might be devoted to bonds?
  • What are the latest items and the place do i locate them?
  • What are the hazards concerned with making an investment in bonds, bond mutual money and bond ETFs?
  • How am i able to use the net to my advantage?

Whether you are concerned about the bond industry already or approximately to go into it, All approximately Bonds, Bond Mutual money, and Bond ETFs will advisor you although the method of selecting the simplest bonds to your wishes, comparing their functionality, and coping with a bond portfolio.

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Extra info for All About Bonds, Bond Mutual Funds, and Bond ETFs

Example text

The difference in yield between the AAA- and BBB-rated bonds is referred to as the excess yield, which issuers must pay for the extra grade of credit risk. Bond prices fluctuate depending on investors’ assessments of the bond’s risk. The relationships can be summarized this way: the greater the risk of a bond, the greater its yield, and the lower its market price. CHAPTER 4 52 WHY BONDS FLUCTUATE IN PRICE Several factors account directly for fluctuations in bond prices. These factors include the relationships between bond prices, coupon rates, market yields, maturities (Malkiel, 1962), and risk assessment.

The price of fixed income securities changes inversely to the changes in interest rates. During periods of rising interest rates, investors holding fixed income securities will experience declines in the market prices of their bonds, because new investors in those bonds will want a competitive yield. Similarly, in periods of declining interest rates, prices of fixed income securities will rise. The longer the maturity and duration of the bond, the greater is the potential interest rate risk. FIGURE 3-1 Market Interest Rates and Bond Prices Market rates of interest Bond prices Market rates of interest Bond prices Risks of Bonds 33 By reducing the maturities of bonds in a portfolio in addition to choosing bond issues with different maturities, an investor can lessen interest rate risk.

After bonds are issued, they rarely trade at their par values ($1,000) in the secondary markets because interest rates are always changing. Certain bonds sell at premium prices and others sell at discounted prices. The market price of a bond is determined using the bond’s coupon payments, the principal repayment, and the investor’s required rate of return, as illustrated in Figure 4-4. Using the time value of money, this stream of future interest payments and principal repayment is discounted at the investor’s required rate of return or the market rate of interest to its present value in today’s dollars.

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All About Bonds, Bond Mutual Funds, and Bond ETFs by Esme Faerber

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