TAILIEUCHUNG - Advanced Bond Concepts Updated 01/23/2006

Professional investment management. A professional nvestment manager—who has access to extensive research, market information, and skilled securities traders—decides which securities to buy and sell for a bond fund. Professional management can be a valuable service because few investors have the time or expertise to manage their personal investments on a daily basis or to investigate the thousands of bonds available in the financial markets. Daily liquidity. Shares in a bond mutual fund may be bought or sold whenever an investor chooses; in other words, the fund offers liquidity. In addition, most bond funds offer options such as checkwriting and telephone redemption to make bond nvesting more benefits are generally not available to. | Updated 01 23 2006 OJlnvestopedia Advanced Bond Concepts http university advancedbond Thanks very much for downloading the printable version of this tutorial. As always we welcome any feedback or suggestions. http Table of Contents 1 Advanced Bond Concepts Introduction 2 Advanced Bond Concepts Bond Type Specifics 3 Advanced Bond Concepts Bond Pricing 4 Advanced Bond Concepts Yield and Bond Price 5 Advanced Bond Concepts Term Structure Of Interest Rates 6 Advanced Bond Concepts Duration 7 Advanced Bond Concepts Convexity 8 Advanced Bond Concepts Formula Cheat Sheet 9 Advanced Bond Concepts Conclusion Introduction In their simplest form bonds are pretty straightforward. After all just about anyone can comprehend the borrowing and lending of money. However like many securities bonds involve some more complicated underlying concepts as they are traded and analyzed in the market. The goal of this tutorial is to explain the more complex aspects of fixed-income securities. We ll reinforce and review bond fundamentals such as pricing and yield explore the term structure of interest rates and delve into the topics of duration and convexity. Note Although technically a bond is a fixed-income security with a maturity of ten years or more in this tutorial we use the term bond and fixed-income security interchangeably. The information and explanations in this tutorial assume that you have a basic understanding of fixed-income securities. Page 1 of 40 Copyright 2006 - All rights reserved. - the resource for investing and personal finance education. Bond Type Specifics Before getting to the all-important subject of bond pricing we must first understand the many different characteristics bonds can have. When it comes down to it a bond is simply a contract between a lender and a borrower by which the borrower promises to repay a loan with interest. However bonds can take on many additional .

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