how can bonds be yielding 0%?
German bunds just hit 0%. How does that work exactly?
http://thestockmarkettoday.com/german-10-year-bun…
Suppose I have $100 of bond with a coupon of 2%.
If the current bonds sell for 1%, I double my money. My bond is now worth $200 in the market. If the current bonds sell for 0.1%, my bond would be worth $1000. And so on.
The lower the yield, the higher the value of the bond. So if the yield hits 0%, wouldnt existing bond be worth infinity amount because you're dividing by zero when calculating the value?
your math is wrong. take your example, with a 2% bond coupon with a duration of 1 year. if you pay 102 for the bond and receive 102 in 1 period, your yield is 0. in equation terms and solving for current price: x = 102 / (1+0) where 0 is the current yield. solve for x...
Indeed, your math is all wrong...
oi vei.
buy a 12c, memorize the YTM calculation on the bank, and read some frank fabozzi.
I was expecting an intellectual conversation about ZIRP or NIRP...oh well
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