How Can a Bond Mutual Fund Promise a Return of Over

question 117

Essay

How can a bond mutual fund promise a return of over 13% when the coupon rate of the bonds they are holding are just 7% and interest rates are falling?

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Definitions:

Legal Positivism

A school of thought in law that holds that the validity of a law is not related to its morality but on its sources and promulgation.

French Civil Code

A foundational legal document in France, also known as the Napoleonic Code, which influences civil law systems worldwide.

Justinian's Code

A collection of laws and legal interpretations developed under the direction of the Byzantine emperor Justinian I in the 6th century.

Civil Law System

A legal system based on written codes or statutes, as opposed to common law, which is based on precedent and judicial decisions.