Thanks! We're a little delayed on the Series 7 product, but I expect it to be available within the next 2 months. We'll do a bunch of marketing when we have a release date. Good luck with your studies!
Here's a quick blurb from the Achievable program I write content for: "Bonds with lower coupons have more price volatility than bonds with higher coupons. To understand this, assume you own two 10 year bonds. One has a 2% coupon and the other has a 10% coupon. When interest rates rise, the value of both bonds will fall. The 2% coupon bond will fall further in price because it has less interest to reinvest back into the market at the new, higher rate of interest. The 10% coupon bond pays much more interest and gives more money to the bondholder to reinvest back into the market at the new, higher rate of interest. The lower the coupon of a bond, the more likely it was sold at a discount. If a bond’s value is mostly from its discount, the investor must wait until maturity to make money from the bond’s discount. The 10% bond is more valuable in this situation because the 10% bond pays more interest that can be reinvested at higher rates right now. When interest rates fall, the value of both bonds will rise. The 2% coupon bond will rise further in price because its value is likely tied to a discount. Remember, the lower the coupon, the more likely the bond was sold at a discount. When much of the bond’s value is achieved at maturity when the investor receives the par value of the bond, it is not required to reinvest large sums of money at lower rates of return. The 10% bond pays much more interest to its bondholder. If the bondholder decides to reinvest their interest back into the market, they are forced to now buy bonds with lower rates of return as interest rates fell. The 10% bond is less valuable in this situation because the 10% bond pays more interest that would be reinvested at lower rates right now."
Thanks, u actually help me solve my curiosity
Great video. Kinda similar with your earlier videos, I think.
Any updates with your series 7 course???
Thanks! We're a little delayed on the Series 7 product, but I expect it to be available within the next 2 months. We'll do a bunch of marketing when we have a release date. Good luck with your studies!
Good stuff
Why does volatility increase with lower coupon rates?
Here's a quick blurb from the Achievable program I write content for:
"Bonds with lower coupons have more price volatility than bonds with higher coupons. To understand this, assume you own two 10 year bonds. One has a 2% coupon and the other has a 10% coupon.
When interest rates rise, the value of both bonds will fall. The 2% coupon bond will fall further in price because it has less interest to reinvest back into the market at the new, higher rate of interest. The 10% coupon bond pays much more interest and gives more money to the bondholder to reinvest back into the market at the new, higher rate of interest.
The lower the coupon of a bond, the more likely it was sold at a discount. If a bond’s value is mostly from its discount, the investor must wait until maturity to make money from the bond’s discount. The 10% bond is more valuable in this situation because the 10% bond pays more interest that can be reinvested at higher rates right now.
When interest rates fall, the value of both bonds will rise. The 2% coupon bond will rise further in price because its value is likely tied to a discount. Remember, the lower the coupon, the more likely the bond was sold at a discount. When much of the bond’s value is achieved at maturity when the investor receives the par value of the bond, it is not required to reinvest large sums of money at lower rates of return.
The 10% bond pays much more interest to its bondholder. If the bondholder decides to reinvest their interest back into the market, they are forced to now buy bonds with lower rates of return as interest rates fell. The 10% bond is less valuable in this situation because the 10% bond pays more interest that would be reinvested at lower rates right now."