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Questions and Answers
How is the term related to maturity when discussing bonds?
How is the term related to maturity when discussing bonds?
The number of years to maturity is the term, and they are often used interchangeably.
What is meant by maturity in the context of bonds?
What is meant by maturity in the context of bonds?
The date on which the bond issuer will pay the principal and redeem the bond.
How are bonds categorized based on their maturities?
How are bonds categorized based on their maturities?
Bonds with maturities of 1 year or less are short-term, those with maturities of more than 1 year up to 10 years are medium-term, and those with maturities exceeding 10 years are long-term.
What is the current yield of a bond and how is it calculated?
What is the current yield of a bond and how is it calculated?
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What does the yield to maturity of a bond indicate?
What does the yield to maturity of a bond indicate?
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What does yield to maturity include that current yield does not?
What does yield to maturity include that current yield does not?
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What does duration measure for a bond?
What does duration measure for a bond?
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For a zero-coupon bond with payments only at maturity, what is the relationship between its duration and term?
For a zero-coupon bond with payments only at maturity, what is the relationship between its duration and term?
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How does a hypothetical bond with a 100% annual yield compare in terms of duration to a bond with the same term but lower yield?
How does a hypothetical bond with a 100% annual yield compare in terms of duration to a bond with the same term but lower yield?
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Why do traders and investors pay close attention to duration?
Why do traders and investors pay close attention to duration?
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Bonds with maturities exceeding 30 years are common in many countries.
Bonds with maturities exceeding 30 years are common in many countries.
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The number of years to maturity is the same as the bond's term.
The number of years to maturity is the same as the bond's term.
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The coupon of a bond changes after it has been issued.
The coupon of a bond changes after it has been issued.
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If a bond's price has risen since it was issued, the current yield will be greater than the coupon.
If a bond's price has risen since it was issued, the current yield will be greater than the coupon.
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Yield to maturity indicates the annual rate the bondholder will receive if the bond is held to maturity.
Yield to maturity indicates the annual rate the bondholder will receive if the bond is held to maturity.
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Yield to maturity includes the value of any capital gain or loss the bondholder will enjoy when the bond is redeemed.
Yield to maturity includes the value of any capital gain or loss the bondholder will enjoy when the bond is redeemed.
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Duration is a number expressing how quickly the investor will receive half of the total payment due over the bond’s remaining life.
Duration is a number expressing how quickly the investor will receive half of the total payment due over the bond’s remaining life.
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A ten-year zero-coupon bond has a duration equal to its term.
A ten-year zero-coupon bond has a duration equal to its term.
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A hypothetical ten-year bond yielding 100% annually has a longer duration than a bond with the same term but lower yield.
A hypothetical ten-year bond yielding 100% annually has a longer duration than a bond with the same term but lower yield.
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The longer the duration of a bond, the less likely its price is to fluctuate before maturity.
The longer the duration of a bond, the less likely its price is to fluctuate before maturity.
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