Episode Summary Why do bond prices fall when interest rates rise, even when the underlying company is perfectly healthy and paying on time? The answer lies in the fundamental concept of present value—the reality that a dollar today is worth more than a dollar in the future. This episode breaks down the unglamorous but load-bearing math of present value, shows how to calculate a bond's price by hand, and builds the mathematical intuition behind discounts, premiums, and why the final principal payment dominates a bond's value.

Key Concepts

• The Time Value of Money: A dollar in the future is worth less than a dollar today because of inflation and opportunity cost—namely, what that dollar could have earned in the meantime.
• Discounting & The Discoun ...