Impact of Maturity on Bond Return

The speaker discusses the effects of the term to maturity on the bonds return.  The question really is, who does better on a bond investment, a short term investor or a long term investor.  He suggests an investment in a bond is equivalent to a series of forward loans at rates given by the forward rate curve. 

Using a spreadsheet, he explains how to delineate whether a short term or long term investment is more profitable using forward rate assumptions.  In essesnce, a long term bond investor is locking in a series of forward rates as implied by the forward rate curve while a short term investor would continue roll their funds over into new short term bonds as the old ones mature.  The uncertainty of forward rates for a short term investor may yield a higher or lower total return depending on the rate environment in the future.
Tim Ord
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