Bonds explained: what they are and when they help
5 chapters·15 min·action plan·mastery check
Chapter 1 of 5
The idea
When interest rates jump, bond prices fall. Here's why that isn't as scary as it sounds.
A bond is a loan
You lend money for a set time and get regular interest. If new bonds start paying more, older bonds paying less become less valuable, so their price falls. Hold to the end and you still get your money back (unless the borrower fails).
Predict first
A 10-year bond paying 3%. Rates jump to 5%. What roughly happens to its price?
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