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New PDF release: All About Bonds and Bond Mutual Funds: The Easy Way to Get

By Esme Faerber

ISBN-10: 0071345078

ISBN-13: 9780071345071

ISBN-10: 0071367829

ISBN-13: 9780071367820

The typical source of revenue investor does not wish or have to get slowed down in technical discussions of rates of interest and time. So All approximately Bonds and Bond Mutual cash provides them what they want­­a uncomplicated but complete remedy of bonds and bond cash. in addition to up-to-date bond details, this revised version additionally comprises new fabric on: * Bond mutual money * Tax-free municipal bonds * foreign bonds and bond cash

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Extra info for All About Bonds and Bond Mutual Funds: The Easy Way to Get Started

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This page intentionally left blank. CHAPTER 2 Evaluating Bond Characteristics KEY CONCEPTS Short-term debt securities ■ Long-term debt securities ■ The risks of bonds ■ Rate of return ■ Different types of yield ■ What rate of return to expect ■ Taxes and returns ■ Liquidity ■ Duration and how it can help lessen volatility ■ Valuation of bonds ■ The yield curve and how to use it ■ Why bonds fluctuate in price ■ All debt securities have the following similar characteristics: A maturity date, which is the date when the bond must be paid off ■ Interest payments, which the issuer promises to pay in return for the use of the money loaned ■ Repayment of principal, which the issuer promises to pay back at the maturity date ■ 21 Copyright 2000 Esmé Faerber.

There is not much that an investor can do to reduce inflation in the economy, but the investor can purchase bonds with yields that exceed the current and expected future rates of inflation. Similarly, investors may be able to lessen the impact of interest rate risk through the concept of duration. Duration is defined as the average time that it takes for a bondholder to receive the total interest and principal. It is the point in time in the life of the bond where the bond’s return remains unchanged despite the movement of market rates of interest.

81 percent). This is a narrow spread between the 3-month maturity and a 30-year maturity. One would expect an upward-sloping curve because the longer the maturity, the greater the bondholder’s exposure to risk. Hence, bond issuers tend to pay more to compensate investors for the risk. What a relatively flat yield curve means is that by extending maturities, investors are taking greater risk for very small additional returns. , where short-term yields have exceeded long-term yields. In other words, yields declined as maturities increased.

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All About Bonds and Bond Mutual Funds: The Easy Way to Get Started by Esme Faerber


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