Maturity Schedules and Laddering

What this video covers

• Why a longer-maturity debt holding carries more price risk if sold before maturity, and why a shorter-maturity holding returns principal sooner but raises reinvestment risk
• How price risk grows with time because more cash flows sit further in the future and are exposed to interest rate swings
• What reinvestment risk actually means: having to redeploy principal at whatever prevailing rates exist when the debt matures
• What a laddered portfolio does that a single maturity cannot: spreading principal across a range of maturity dates so only a portion comes due at once
• What a bullet portfolio is and why concentrating all maturities on a single date piles both price risk and reinvestment risk onto that one day
• Why laddering does not eliminate price risk or reinvestment risk, and how the exam baits you with words like "removes" or "eliminates"
• How the appropriate mix of maturity schedules depends on the customer's ability to absorb losses, not on the ladder itself