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Bookmark or Share- Duration | Definition & Examples - InvestingAnswersUsing the same example from our earlier table (with interest rates rising 20 basis points, or 10 basis points per semiannual period), we can use discounted present values for each period to ultimately calculate effective duration:
- Monthly vs. Quarterly Dividends: Which Earns Higher Returns?The major advantage is fairly obvious -- a monthly dividend creates a more regular income. Instead of budgeting out your funds on a quarterly basis, you can have a more regular cash flow through monthly dividends. Although it is possible to achieve this through staggered quarterly dividends, it can be tricky to achieve.
- Basis Points (bps) Definition & Example - InvestingAnswersWhat are Basis Points (bps)? A basis point is the smallest measure used in quoting yields on fixed income products. Basis points also pertain to interest rates. One basis point is equal to one one-hundredth of one percentage point (0.01%). Therefore, 100 basis points would be equivalent to 1%.
- Discount Rate Definition & Example - InvestingAnswersThe Fed Funds rate is typically 25 basis points (bps) lower than the discount rate. The Federal Reserve sets the discount rate and sets a target rate for the Fed funds rate, which is then negotiated by the banks involved in each loan.
- Effective Duration Definition & Example - InvestingAnswersP-= the bond's price if its yield falls by x basis points P + = the bond's price if its yield rises by x basis points (Y + - Y-) = Change in yield in decimal. For example, let's assume you purchase a Company XYZ bond at 100% of par. The bond currently has an 8% yield.
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