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Increasing the coupon rate and decreasing the time to maturity will increase the interest rate risk of a bond.
Coupon Rate
The interest payment made annually on a bond, shown in percentage terms of its face value.
Time To Maturity
The duration remaining until the final payment date of a loan, bond, or other financial instrument, at which point the principal (and usually the final interest payment) is due to be paid.
Interest Rate Risk
The risk that the value of an investment will decrease due to a change in interest rates.
- Gain an understanding of the variables that contribute to the risk of interest rates for bonds, encompassing the coupon rate, the time frame to maturity, and the particular features of the bond.
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Learning Objectives
- Gain an understanding of the variables that contribute to the risk of interest rates for bonds, encompassing the coupon rate, the time frame to maturity, and the particular features of the bond.
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