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Discussion in 'Complete Trading Education- Forex Military School' started by Administrator, Mar 1, 2012.
Please use this thread for questions, answers, and comments on this lesson.
From my understanding 5% annual rate would not mean 2.5% semi annually, but sqrt(1.05), that is 2.47%. Am I wrong?
Another question: I noticed that bond quotations for long term bonds (as in http://www.bloomberg.com/markets/rates-bonds/government-bonds/us/ for example) correspond to bonds issued this year. The previous bonds, which must be nearer to maturity, aren´t they traded as well? Anyone can sell or buy bonds at any time?
you're speaking about compounding of coupon payments and you use geometric approach, assuming potential reinvestment of coupon payment, if it pays semi-annually. I will tell you even more, if you reinvest coupon payment at lower rate than yield to maturity, you will give even lower return. So, appling devision just by 2 is approximation.
Yes, you're right all previously issued bonds remain in turnover till maturity. They call "off the run" securities. The most recent issue calls "on the run".