On Makeham ’ s Formula and Fixed Income Mathematics
نویسنده
چکیده
The return on a bond investment comes from three sources: Interest payments, realized capital gains and accrued capital gains. We provide an exact description on how the capital gains can be measured under a variety of accounting rules for measuring accruals and study the theoretical properties of such rules, their taxation consequences and the relation between the yield before tax and the yield after tax. The vehicle of our exposition is Makeham's formula, an actuarial formula for the present value of a payment stream largely neglected in the nance literature.
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