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Chapter 28, Part II. Relation with Other Financial Markets. - Q&A

Discussion in 'Complete Trading Education- Forex Military School' started by Administrator, Mar 1, 2012.

  1. Administrator

    Administrator Just Administrator :-)

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    Please use this thread for questions, answers, and comments on this lesson.
     
  2. Aldo Colombo

    Aldo Colombo Corporal

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    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?
    Thank you
     
    #2 Aldo Colombo, Mar 9, 2012
    Last edited: Mar 9, 2012
  3. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Hi Aldo,
    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".
     

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