It’s here — my final day of blogging about nonfiction personal finance readings for #NationalReadingMonth. It’s been a fun intro to blogging for me, and I succeeded in posting on 14 of the 19 days since I put the plan into action. Busy work + busy home life meant I missed a few chances. Anyway,  today, on my final day, I feature…

Relationship between Bonds & Interest Rates

I know what you’re thinking: Why on earth did she choose the driest topic imaginable for her last post?

What is it? This is actually an info page for potential Wells Fargo Advantage Funds investors, but it concisely describes the relationship between interest rates and bond prices — a concept for which it’s nearly impossible to find resources appropriate for a high school audience. It’s got lots of bond vocabulary and includes an inverse relationship graph.

Why is it cool? As I mentioned, the bond lesson was the hardest to find high school level resources for, and many articles take you way too deep in the woods for a basic understanding. On the other hand, this idea of bond prices and interest rates is fundamental to understanding the bond market, so it’s gotta be in the curriculum.

Questions I Might Ask:

1. For reading comprehension:
   • How is a bond similar to a loan?
   • The article says that a bond’s coupon rate, even though it’s fixed, becomes more or less attractive to investors. Why is this true?
   • How often do interest rates change?
   • What are some other factors that impact how attractive a bond is to buyers?
2. To test vocabulary:
   • What is meant by an “inverse relationship?”
   • What is meant by “opportunity cost?”
   • Define par value, maturity date, and coupon rate.
3. Check for understanding:
   • How are bonds different from stocks?
   • If a bond you own has a coupon rate of 4% and interest rates are currently at 2%, would you price your bond for more or less than par value?
   • If a bond you own has a coupon rate of 4% and interest rates are currently at 5.2%, would you price your bond for more or less than par value?
   • What might be a downside of constantly buying and selling bonds based on interest rates?

Where is it in the NGPF collection? This is resource 6 in the “Bond Investing” lesson in our Investing unit.

I hope you enjoyed my daily blogging about awesome (or, at least, I find them awesome) nonfiction texts, appropriate for high school students, on the topic of personal finance. Happy #NationalReadingMonth!

About the Author

Jessica Endlich

When I started working at Next Gen Personal Finance, it's as though my undergraduate degree in finance, followed by ten years as an educator in an NYC public high school, suddenly all made sense.