Relationship of Bond Prices to Changes in Maturity and Coupon

What this video covers

• Why pull to par is automatic: discount bonds rise toward $1,000 and premium bonds fall toward $1,000 regardless of what prevailing rates do
• How long-term bonds swing harder than short-term bonds when interest rates move, and why that drives every portfolio strategy question on the exam
• When to extend maturities (expecting rates to fall) versus shorten maturities (expecting rates to rise) to manage interest rate risk
• Why a laddered portfolio requires no rate forecast, and how it differs from a bullet strategy built around a single known cash need
• Why low-coupon and zero-coupon bonds are more sensitive to rate changes than high-coupon bonds for the same maturity
• Why a zero-coupon bond has the maximum duration for its maturity, since 100% of cash flow lands at the end
• The golden rule of bond volatility: longest maturity plus lowest coupon equals the greatest interest rate risk