Cash flow yield does not consider credit risk assumption. (In the same choice one answer was one of the limitations was default risk was constant over the life). This is ok.
In another vignette, it says default risk was constant is not a limitation.
Can any one clarify whether credit risk and default risks are limitations or not. What are the limitations of cash flow yield.
thanks作者: troymo 时间: 2011-7-13 16:25
actually its IRR and reinvestment risk作者: tianxin 时间: 2011-7-13 16:25
Northeastern. Looks like you can do the test even in the sleep. How long did you study all this stuff?作者: giants2010 时间: 2011-7-13 16:25
i thought the limitation is that it assumes its reinvested at the same rate, that the asset gets held till maturity, and there is no prepayments.作者: Uranus08 时间: 2011-7-13 16:25
vinnie -
Cash flow yield assumes CONSTANT prepayments, even with changing interest rates.
