bonds

A bond is a loan you make to a government or company: you pay the price today, collect a fixed coupon each period, and get the face value back at maturity. Because the coupon is locked in for the bond's whole life, the only thing that can move its value is the interest rate the rest of the market demands — and it moves the price in the opposite direction. When rates rise, your older, lower-coupon bond looks stingy next to new bonds, so buyers will only take it at a discount; when rates fall, your bond's fat old coupon is suddenly a bargain, so it commands a premium. A bond is worth exactly its face value (par) only at the single moment the market rate equals its coupon. The second big idea is duration: the longer your money is tied up, the more its price swings for the same change in rates — a 1-point rate rise barely dents a 2-year bond but can take double digits off a 30-year one, which is why 'safe' long bonds are quietly the volatile end of fixed income. The simulator prices a bond as the present value of its coupon stream plus its face value, draws three maturities at once as downward-sloping price-versus-rate curves, and drops a marker on each as you drag the market rate so the inverse relationship and the duration spread are both visible at a glance. The durable lessons: hold a bond to maturity and the price swings don't touch you (you still get every coupon and your money back); match a bond's maturity to when you'll need the cash; and understand that long bonds trade price stability for higher rate sensitivity.