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Ms. Olson is managing a bond portfolio and her investment horizon is 3 years. If she tries to predict bond yields at the end of the 3 year period, calculate the future bond price based on the prediction, and also consider coupon income in order to obtain a forecast of the total return during her holding period, she is doing _____ analysis.

Answer :

Ms. Olson  tries to predict bond yields at the end of the 3 year period, calculate the future bond price based on the prediction, and also consider coupon income in order to obtain a forecast of the total return during her holding period, she is doing horizon analysis.

The bond price is what investors are wanted to pay for an existing bond. The bond price is the price in which the discounting of the expected cash flows to the current value using a discount rate.

She tries to predict bond yields at the end of the 3 year period for  total return. The bond fund invests in a portfolio of fixed-income securities. Bond funds provide instant diversification for investors for a low required minimum investment.  

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