11 lines
651 B
Markdown
11 lines
651 B
Markdown
A lower coupon bond pays you less cash along the way, meaning more of its total value is tied up in that single **par value payment at maturity**. That distant lump sum is more sensitive to interest rate changes than frequent coupon payments.
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A higher coupon bond pays you more cash sooner — those early payments are less affected by rate changes, so the overall price is more stable.
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The two rules together:
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- **Same coupon, different terms** → longer term is more volatile
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- **Same term, different coupons** → lower coupon is more volatile
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Think of it this way: **the less cash you get upfront, the more exposed you are to rate changes.**
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