OT
03-10-2002, 12:06 AM
SOA, Exam6
Managing Investment Portfolios
Chapter 8, page 17
Semi-active Management: Immunization
Techniques and Vehicles
TARGET RATE OF RETURN
I am not sure I get this statement on page 8-17, In general, for an upward sloping yield curve the immunization target rate of return will be less than the yield to maturity because of the lower reinvestment return;
Is it simple because here we are assuming that the term lengths of the initial investments are longer than the term lengths of the reinvestments? If so, how is it that we can say this is generally true without knowing anything about the investment horizons?
Any help or even questions will be greatly appreciated.
Managing Investment Portfolios
Chapter 8, page 17
Semi-active Management: Immunization
Techniques and Vehicles
TARGET RATE OF RETURN
I am not sure I get this statement on page 8-17, In general, for an upward sloping yield curve the immunization target rate of return will be less than the yield to maturity because of the lower reinvestment return;
Is it simple because here we are assuming that the term lengths of the initial investments are longer than the term lengths of the reinvestments? If so, how is it that we can say this is generally true without knowing anything about the investment horizons?
Any help or even questions will be greatly appreciated.