SAFE & SOUND ADVICE FOR HH BOND HOLDERS

Risk-free rate of return (i) is proxied by return on US Short-term (ST) T-bills . PLT = P of LT bonds; PST = P of ST bonds. If interest rates ( ( ( PLT + ( PST (interest rate r), but ( PLT > ( PST ( LT bonds require a maturity premium (mp) to compensate for (‘d risk due to ( interest rates ( interest rates on LT bonds > those on ST bonds. Yield to Maturity (YTM) – k when bonds are held to ... ................
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