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The Consideration of Coupon Levels, Taxes, Reinvestment Rates, and Maturity in the Investment Management of Financial Institutions

Published online by Cambridge University Press:  19 October 2009

Robert H. Cramer  and
Stephen L. Hawk
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Extract

The investment managers of financial institutions face a multiplicity of factors that influence the performance of fixed coupon securities in their investment portfolios. These factors can be classified under three headings:

1) Condition of the economy–changes in interest rate levels and spreads;

2) Nature of the financial institution–institution's tax rate, economic factors such as deposit variability and loan demand for banks, and premium inflow and benefit payments for insurance companies;

3) Characteristics of individual securities–(a) their attractiveness in terms of risk level and marketability; and (b) their contractual factors (coupon level and maturity) and tax status.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 10 , Issue 1 , March 1975 , pp. 67 - 84
Copyright
Copyright © School of Business Administration, University of Washington 1975

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References

REFERENCES

[1]Buse, A. “Expectations, Prices, Coupons and Yields.” Journal of Finance, Vol. 25, No. 4 (September 1970), pp. 809–818.CrossRefGoogle Scholar
[2]Conarard, Joseph W.The Behavior of Interest Rates. New York: National Bureau of Economic Research, 1966.Google Scholar
[3]Homer, Sidney, and Johannesen, Richard I.. The Price of Money. New Brunswick: Rutgers University Press, 1969.Google Scholar
[4]Homer, Sidney, and Liebowitz, Martin. Inside the Yield Book. Englewood Cliffs: Prentice-Hall, 1973.Google Scholar
[5]Malkiel, Burton G.The Term Structure of Interest Rates. Princeton: University Press, 1966.Google Scholar
[6]Malkiel, Burton G.The Term Structure of Interest Rates: Theory, Empirical Evidence, and Applications. New York: McCaleb-Seiler, 1970.Google Scholar