Two portfolio managers are discussing the investment characteristics of amortizing securities. Manager A believes that the advantage

Question:

Two managers are discussing the investment characteristics of amortizing securities. Manager A believes that the advantage of these securities relative to nonamortizing securities is that because the periodic cash flows include principal repayments as well as payments, the manager can generate greater reinvestment income. In addition, the payments are typically monthly so even greater reinvestment income can be generated. Manager B believes that the need to re-invest monthly and the need to invest larger amounts than just interest payments make amortizing securities less attractive. Whom do you agree with and why?
Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...