Explain how a bond’s interest rate can change over time even if interest rates in the economy do not change.

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Explain how a bond’s interest rate can change over time even if interest rates in the economy do not change.

 

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Because of the yield curve, there are different interest rates that apply to each time to maturity.  So, as a bond gets closer to its maturity date, different interest rates may apply to its discounting even when interest rates in the economy have not changed.

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