Principles of Finance · free preview
A Century of Bond Returns
Bonds have returned less than stocks across the century but with lower volatility, their returns driven by yield levels at purchase and the disinflation windfall, and their role is stability and income rather than growth.
1. What bonds earned
What bonds earned
2. The disinflation windfall
The disinflation windfall
3. Government versus corporate bonds
Government versus corporate bonds
4. Bonds in the portfolio
Bonds in the portfolio
5. The long-run ordering
Which statement correctly orders the long-run US performance of major asset classes?
6. The dominant return driver
What single factor most closely approximates a bond's long-run realized return?
7. The 1980s gift
Why did bond investors in the early 1980s enjoy one of history's best bond trades?
8. The windfall's warning
What warning does the disinflation windfall carry for today's bond investors?
9. Treasuries as crisis insurance
Why do Treasuries diversify a stock portfolio especially well in crises?
10. The high-yield surprise
What did 2008 teach holders of high-yield corporate bonds?
11. The one-decade-plus premium
What two-word term names the annual return difference between corporate and government bonds, roughly a percentage point long-run? Answer in lowercase.
12. The balanced allocation's bond share
What is the traditional bond share, as a percentage, of the classic balanced portfolio? Write the number.
13. The great bond market driver
What two-word regime of falling inflation and yields, from the early 1980s, powered the four-decade bond bull market? Answer in lowercase.
14. The return approximation
What yield, quoted at purchase, most closely approximates a bond's subsequent long-run realized return? Answer with two words.
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