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A simple and student-friendly approach to the mathematics of bond prices.(Author abstract)
- Article from:
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Quarterly Journal of Business and Economics
- Article date:
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September 22, 2007
- Author:
- Lawrence, Edward R.; Shankar, Siddharth
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Copyright informationCOPYRIGHT 2007 University of Nebraska-Lincoln. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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In his seminal paper Malkiel (1962) rigorously developed and proved five theorems showing the relationship between changes in yield to maturity and bond price movements. These theorems are important in the eyes of the academicians and practitioners and find a place in virtually all finance textbooks dealing with the pricing of bonds. The proofs of the theorems are based entirely on calculus and seem to be challenging for finance professionals and students. Hence, finance textbooks usually describe these five theorems using figures and numerical examples to illustrate the results instead of providing any logical proof In this paper we prove the Malkiel (1962) theorems using simple algebra ...
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