Two portfolio managers are discussing the investment characteristics of amortiz- ing securities. Manager A believes that the
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Two portfolio managers are discussing the investment characteristics of amortiz- ing securities. Manager A believes that the advantage of these securities relative to nonamortizing securities is that because the periodic cash flows include princi- pal 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 inter- est payments make amortizing securities less attractive. Whom do you agree with and why?
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