Khan Academy - Bond Prices and Interest Rates

[ivanjrt]

Please, Can anybody answer my question??? Why would the interest rates change???? Does he just mean that the next set of bonds were issued under new economic enviroment which made their interest rates change from the first ones at 10% ???

[rond02kg]

I don't get why a bond paying 15% in the future would be worth less now then a bond paying 10%. Is the first one not going to be giving you more money?

[rond02kg]

@rond02kg

i understand how the math works out that way, just not the logic behind it i guess.

[choipnugget]

@rond02kg I think you may have gotten mixed up. A bond paying 15% interest would be worth more. In his example. when the interest rate went up, it devalued the 10% bond the seller already owned