5y risk free bond with a starting yield of 20% and flat yield curve. Assume you sell it every year after 1 year and buy a new 5y bond. In scenario 1 yield declines 2% per year for ten years. In scenario 2 yield is constant. Which scenario has higher returns after a decade?
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Despite the massive drop in rates it's 2, the higher yield eventually beats the gains from duration. Was a bit surprising to me.pic.twitter.com/mipcssd2oJ
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Replying to @macrocephalopod
i know nothing about bonds but the question was phrased in such a way that made the answer obvious.
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Replying to @theemilyaccount
were you good at passing tests at school
11:09 AM - 4 Oct 2021
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