Bonds Essay Example | Topics and Well Written Essays - 250 words

Bonds - Essay ExampleOn yield, even though TGT trusss slang a lower yield station that would result in high price volatility, the difference of 1% is non significant enough to overshadow the other factors. WTM bonds therefore have higher price volatility.The date based estimate of return is different from the actual return metric based on expected price changes because of the following reasons. First, the duration-based approach views the entire duration of the bond from a given point in time. Given that the bonds earn interest at different rates, the durations for the bonds are similarly different and are less than their terms respectively. Also, when durations are considered, bond prices are affected hence resulting in different interest rates of return. Changes in prices, which are imminent in this case, are also not taken into consideration in the former case contributing to the difference.I think the interest rate for WMT bonds are going to fall over the next course of instruction. This is because of lower interest rates and longer duration that would result into lesser demand for the bonds hence a reduction in prices. However, I expect the TGT bond prices to rise because of higher interest rates and shorter durations.I would therefore recommend the WMT bonds since over the next year their prices will rise and you can sell them for a greater price than you will buy them and at the same time get higher interest over the