Interest Rate Risk Definition and Impact on Bond Prices

Interest rate risk is the potential for investment losses that can be triggered by a move upward in the prevailing rates for new debt instruments. If interest rates rise, for instance, the value of a bond or other fixed-income investment in the secondary market will decline. The change in a bond's price given … See more

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Managing Interest Rate Risk - Investopedia

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Aug 25, 2023 · Suppose an individual purchases a 3% fixed-rate 30-year bond for $10,000. This bond pays $300 per year through maturity. If during this time, interest rates rise to 3.5%, new …

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What Are The Risks Of Investing In A Bond? - Investopedia

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Dec 9, 2021 · Example of Interest Rate Risk . Say you bought a 5% coupon, a 10-year corporate bond that is selling at par value of the $1,000. If interest rates jump to 6%, the market value of …

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How Do Interest Rates Affect Your Bonds? - Morningstar

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Oct 16, 2019 · The federal-funds rate, the interest rate at which banks lend money to each other overnight, is now targeted between 1.75% and 2.00%. When the Fed raises or lowers rates, it …

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Inverse Relation Between Interest Rates And Bond Prices

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Oct 15, 2024 · Zero-Coupon Bonds . If a zero-coupon bond is trading at $950 and has a par value of $1,000 (paid at maturity in one year), the bond's rate of return will be 5.26%: (1,000 - 950) ÷ …

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