RT Journal Article
SR Electronic
T1 Bad Bond Math: <em>An Object Lesson Using</em>
               <br/>
               <em>Bloomberg’s After-Tax Yields on Market Discount Bonds</em>
JF The Journal of Wealth Management
FD Institutional Investor Journals
SP 61
OP 67
DO 10.3905/jwm.2013.15.4.061
VO 15
IS 4
A1 Donald J. Smith
YR 2013
UL https://pm-research.com/content/15/4/61.abstract
AB Defining information to be a subset of data (information is data that has utility in decision making), the author offers an object lesson to demonstrate the challenge facing an investor using after-tax yield data presented on a widely viewed Bloomberg page. He demonstrates that users of “black box” technologies need to be able to confirm the numbers that are presented to them by data suppliers and check those calculations and underlying assumptions on a regular basis. Failure to understand these assumptions can lead investors to erroneous conclusions, as illustrated in the comparison of two categories of bonds, deeply discounted U.S. corporate bonds, distressed tax-exempt U.S. municipal bonds, and the projected after-tax rates of return on all of the securities under consideration (given assumed tax rates on ordinary income and capital gains and, of course, assuming no default).TOPICS: Fixed income and structured finance, information providers/credit ratings, risk management