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Two portfolio managers are discussing the investment characteristics of amortizing securities. Manger A believes that the advantage of these securities relative to nonamortizing securities is that because the periodic cash flows include principle repayments as well as coupon 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 reinvest monthly and the need to invest larger amounts than just coupon interest payments make amortizing securities less attractive. Whom do you agree with and why?

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Financial Management, Finance

Category:- Financial Management
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