How does inflation affect fixed-income investments?

July 7, 2024 No Comments

A: Inflation is typically defined as a sustained increase in the price level of goods and services. There is no widespread consensus on the primary cause of inflation, but most economists agree that certain mechanisms in the economy, mainly commodity price increases and currency depreciation,

How does preferred stock differ from company issued bonds?

July 7, 2024 No Comments

A: Preferred stock is a special kind of equity ownership, while bonds are a common form of debt issue. Many consider preferred stock an investment that lands in between common shares and bonds. Despite many similarities, preferred stock is generally riskier than a bond and

How can I create a yield curve in Excel?

July 7, 2024 No Comments

A: You can create a yield curve in Microsoft Excel if you are given the time to maturities of bonds and their respective yields to maturity. The yield curve depicts the term structures of interest rates for bonds and the term structures could be normal,

How Central Banks Influence Money Supply

July 7, 2024 No Comments

A: Central banks use several different methods to increase (or decrease) the amount of money in the banking system. These actions are referred to as monetary policy. While the Federal Reserve Board (the Fed) could print paper currency at its discretion in an effort to

How do hurdle rate MARR and internal rate of return IRR relate?

July 7, 2024 No Comments

A: In capital budgeting, projects are often evaluated by comparing the internal rate of return (IRR) on a project to the hurdle rate, or minimum acceptable rate of return (MARR). Under this approach, if the IRR is equal to or greater than the hurdle rate, the

How do I calculate a discount rate over time, using Excel?

July 7, 2024 No Comments

A: The discount rate is the interest rate used when calculating the net present value (NPV) of something. NPV is a core component of corporate budgeting and is a comprehensive way to calculate whether a proposed project will add value or not. For this article, when we look at the discount

How do I calculate the expected return of my portfolio in Excel?

July 7, 2024 No Comments

A: The expected return of your portfolio can be calculated using Microsoft Excel if you know the expected return rates of all the investments in the portfolio. Using the total value of your portfolio, the value of each individual investment, and its respective return rate,

How do I calculate the Macaulay duration of a zero-coupon bond in Excel?

July 7, 2024 No Comments

A: The resulting Macaulay duration of a zero-coupon bond is equal to the time to maturity of the bond. A zero-coupon bond is a type of fixed-income security that does not pay interest on the principal amount. However, to compensate for the lack of coupon

How do I calculate yield in Excel?

July 7, 2024 No Comments

A: When assessing the profitability of bonds, analysts use a concept called yield to determine the amount of income that a given investment can be expected to generate each year. Yield is prospective and should not be confused with rate of return, which refers to

How are municipal bonds taxed?

July 7, 2024 No Comments

A: Municipal bonds are commonly tax-free at the federal level, but can be taxable at state or local income tax levels or under certain circumstances. An Overview of Municipal Bonds A municipal bond, also known as a muni, is a debt security used to fund

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