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In a work environment employees and employers often discuss 401K plans, investment ideas and other bonds and shares. Many individuals do not have a clear idea of investments in the retirement accounts or certificate of deposits maturity process. One employee in our office, raised questions about bonds that were purchased at 10% according to the broker had a yield of maturity of 9%, confusing the individual.
Yield Of Maturity Factors
According to Block and Hirt (2005), the yield to maturity, or discount rate, is the rate of return required by bondholders and three main factors affecting yield of maturity are real rate of return, inflation premium and risk premium. Real rate of return is a return that investors demand after inflation adjustments. Inflation premium is required by investors to compensate the inflation adjustments.
Combining both real rate of return and inflation premium determines the risk-free rate of return. This is the rate that compensates the investor for the......

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Approximate Word Count: 657
Approximate Pages: 3 (250 words per double-spaced page)

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