Some Implications of Inflation-Caused Changes in Timing of Asset Yields

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Abstract:

Using models of corporate bonds for fixed income investments (FII's) and sustained yield forests for variable income investments (VII's), this analysis demonstrates how inflation can shift income of new FII's toward the present, relative to income of VII's with the same internal rate of return. This shortened payback period is accompanied by a reduced present value for FII's when investment internal rate of return exceeds the guiding rate of interest. A relative disadvantage of debt financing for VII's during inflation is illustrated. Forest Sci. 29:149-159.

Keywords: Fixed income investments; variable income investments

Document Type: Journal Article

Affiliations: Associate Professor of Forest Economics, Virginia Polytechnic Institute and State University, Blacksburg, Virginia 24061

Publication date: March 1, 1983

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  • Forest Science is a peer-reviewed journal publishing fundamental and applied research that explores all aspects of natural and social sciences as they apply to the function and management of the forested ecosystems of the world. Topics include silviculture, forest management, biometrics, economics, entomology & pathology, fire & fuels management, forest ecology, genetics & tree improvement, geospatial technologies, harvesting & utilization, landscape ecology, operations research, forest policy, physiology, recreation, social sciences, soils & hydrology, and wildlife management.
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