Fixed Income Characteristics: Rapid Fire

What this video covers

• Why bond prices and interest rates move in opposite directions, and how to picture the see-saw on a nervous exam morning
• How premium bonds amortize toward par while discount bonds accrete toward par, and what built-in gain or loss each carries if held to maturity
• How to order nominal yield, current yield, yield to maturity (YTM), and yield to call (YTC) for both premium and discount bonds, and why yield to worst is always the lowest
• Why duration measures price sensitivity to rate changes, and how maturity, coupon, and yield each push duration up or down
• Why zero-coupon bonds have the highest interest rate risk yet zero reinvestment risk, and why their duration equals their maturity
• The investment-grade cutoff at BBB-/Baa3, what a "falling angel" downgrade triggers, and why credit spreads widen during recessions even if Treasury yields fall
• When to use effective duration instead of modified duration, and why embedded options in callable bonds demand the switch