Chapter 22 CMP Page 6

Discussion in 'CA1' started by shinmo, Aug 28, 2015.

  1. shinmo

    shinmo Member

    “When analysing the expected return… take account of the effect of the reinvestment of income at different initial yields”?

    Since reinvestment depends on subsequent yields, why is initial yield involved?

    Thanks :)
     
  2. Steve Hales

    Steve Hales ActEd Tutor Staff Member

    The "different initial yields" are those associated with the subsequent investments you'll have to make every time you receive some investment income - and there's a risk that they're not going to be the same as original expected return.
     

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