The Basics

What is the connection between prevailing interest rates and a bond’s maturity?

Changes in prevailing interest rates may change a bond’s returns, but not in the same way for all bonds. If a bond is relatively long term regarding the date when it matures, its price may be more affected when compared with a bond with a relatively shorter maturity. Generally, bonds of longer duration and maturities will offer yields that help to compensate investors for this extra interest-rate risk.


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