The Biggest Mistake Students Make With Bond Pricing
Struggling with Bond Pricing? Here is the no-BS guide to understanding it, complete with real-world examples and study shortcuts.
D
David Kim · Curriculum Designer
Let's be brutally honest: Bond Pricing is usually taught terribly in textbooks. You don't need to be a genius to master this; you just need to understand one specific mental model.
Did you make this error?
- The Trap: confusing coupon rate with yield to maturity
- The Proof: Read this scenario: The coupon rate is fixed and tells you the cash payout. Yield to Maturity (YTM) changes every day based on market price. If YTM rises, bond prices fall.
If your logic doesn't match the proof above, you've fallen for the trap. Erase it and start over.
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