How bonds work, from price and yield to the tax on the interest.

How the course works

Every lesson uses the same example: a $1,000 bond with a 4% coupon and 10 years to maturity. One model script prices every bond in the course.

The yields and spreads are examples, not forecasts. The I bond rates and the tax brackets are real, and each lesson gives its sources.

The lessons

1. When rates go up, bond prices go down. The coupon, the price, current yield and yield to maturity.
2. Duration tells you how far a bond price moves. Macaulay duration, modified duration and convexity.
3. A higher yield is a promise, not a return. The spread, expected loss and the default rate that uses up the spread.
4. Treasury bills and TIPS each remove one risk. T-bills, the state tax benefit, TIPS and breakeven inflation.
5. An I bond pays inflation plus a fixed rate, with limits. The composite rate, the purchase limit, the penalty and the tax.
6. A ladder and a fund lose the same value when rates rise. The same bonds, the same loss, and the year when the higher rate pays it back.
7. A municipal bond wins only above a certain tax rate. The tax-equivalent yield, the break-even tax rate and the 2026 brackets.

The course on one page

To price your own bond, use the bond price and yield calculator.

Sources

• Investor.gov, Municipal Bonds, for the tax treatment of municipal bond interest, and for prices that fall when rates rise.
• IRS, Topic 403, Interest Received, for Treasury interest that is exempt from state and local income tax, and for savings bond interest that you can defer.