Dear all,
Source Finquiz test
The text says 'in general, for an upward-sloping yield curve, the immunization target rate of return will be less that the YTM because of lower reinvestment return.
As I understand immunization rate is the rate of the bond (asset portfolio) which is used to cover the cash flows required at the time of settling the liability. It is fixed at the initiation of the immunization.
On a future date if the interest rates rise, then the immunization value of the bond may not be sufficient while liquidating to settle the liability.
Now given this is my understand, can anyone please expand a little bit more on the text.
Thank you