Relationship between bond prices and interest rates | Finance & Capital Markets | Khan Academy

Why bond prices move inversely to changes in interest rate. Created by Sal Khan. Watch the next lesson: https://www.khanacademy.org/economics-finance-domain/core-finance/stock-and-bonds/bonds-tutorial/v/treasury-bond-prices-and-yields?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Missed the previous lesson? Watch here: https://www.khanacademy.org/economics-finance-domain/core-finance/stock-and-bonds/bonds-tutorial/v/introduction-to-the-yield-curve?utm_source=YT&utm_medium=Desc&utm_campaign=financeandcapitalmarkets Finance and capital markets on Khan Academy: Both corporations and governments can borrow money by selling bonds. This tutorial explains how this works and how bond prices relate to interest rates. In general, understanding this not only helps you with your own investing, but gives you a lens on the entire global economy. About Khan Academy: Khan Academy offers practice exercises, instructional videos, and a personalized learning dashboard that empower learners to study at their own pace in and outside of the classroom. We tackle math, science, computer programming, history, art history, economics, and more. Our math missions guide learners from kindergarten to calculus using state-of-the-art, adaptive technology that identifies strengths and learning gaps. We've also partnered with institutions like NASA, The Museum of Modern Art, The California Academy of Sciences, and MIT to offer specialized content. For free. For everyone. Forever. #YouCanLearnAnything Subscribe to Khan Academy’s Finance and Capital Markets channel: https://www.youtube.com/channel/UCQ1Rt02HirUvBK2D2-ZO_2g?sub_confirmation=1 Subscribe to Khan Academy: https://www.youtube.com/subscription_center?add_user=khanacademy

Comments

1. Very good explanation, thank you.
2. It's only a problem if you need to sell the bond. Buy and hold people. Buy and hold.
3. thank you sir
4. So if I go buy a bond, am I getting the old one or the new one? I always hear this concept described in terms or old bonds vs. new bonds.
5. If its 10% interest of a $1000 bond, why is it compounded? It's not as if the interest from the first year is going to be added to the value of the bond, can someone explain to me? Would really appreciate it.
6. Which interest rate is he referring to?
7. I've lost money the last few weeks because bonds continue to falter
8. i am happy
9. The 10% coupon is SEMI ANNUAL payment. So instead of $50 paid per 6 months, it should be $100 per 6 months right? I'm confused right now...
10. But what if I don't want to sell my bond and I'm willing to wait to the end of the maturity. How would the interest rate effect me ?
11. Great video!
12. Quick question. So if the interest rates go down and the demand for bonds increase, do the prices of bonds increase? And if they do, doesn't the increase in these prices discourage buyers to go back to the interest rates savings?
13. What software do you use to write in the digital black board?
14. Thank you for the explanation, I had a hard time trying to understand this relation !
    I just have a question on your calculus when you talk about a zero coupon : if the interest become ten percent, and reasoning by the logic you show at the beginning : The first year I get 10% of 1000 that 100, the second year I also get 10% of 1000 that 100 + the 1000 of the bond.
    Finally I got : 1000+100+100=1200=1000 + 1000*i + 1000*i = 1000 (1 + 2*i) and not 1000*((1+i)^2) : because the money of the first interest is not reinvest or is it and that would explain why we have 1000*((1+i)^2).
    Looking Forward to your response ! Thanks
15. coupon rate and interest rate are different things right ? and interest rate u mean as in the interest u get when u save money in a bank ? or is there another interest rate for bonds specifically ? dumb questions but pls someone answer
16. What if your purchasing that bound when the interest went down to 5% but your buying it 6 months before it expires?
17. I have a doubt.. So is that mean in zero coupon bond interest is not paid in between years its directly been paid on maturity date(interest + par value)?...and while buying the bond how the rate of bond is fixed its the same way showed in above video? and other thing is instead of buying bond we can keep put this money in fixed deposit where we can get more interest rate and i can take that money whenever i wanted.....?
    reply will be appreciated
18. What application does he use for his videos?
19. Thank you so much:) I love that you have the subtitle in the video
20. sorry, something I just don't get quite grapple with - why when interest rates go up to say from 10% to 15% for a bond, wouldn't the issuer want to pay more so that he'll receive more money from the interest rate in the end (or when the bond matures)? I'm still a little new to this so forgive me