Adding a Third Dimension to Bond Analysis

Taylor, Joe
July 2011
Journal of Financial Planning;Jul2011, Vol. 24 Issue 7, p44
Academic Journal
• This paper seeks to illuminate how bond returns vary as a bond moves through time. • It also shows how to develop a price curve from the data points implied in the yield curve. • The author analyzes the effect of coupon rates on bond returns in varying interest rate environments. • The purpose is to provide information to make better fixed-income investment decisions: » Visualize and model expected price behavior of bonds under varying interest rate scenarids. » Aid in selecting securities with coupons and maturities to maximize returns in changing interest rate environments. • The author graphically represents this information for client teaching purposes and better understanding for planners of all experience levels. A spreadsheet workbook is available online for advisers to download and adapt to their own practices; the link can be found in this article at www.FPAnet.org/Journal.


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