Consider you buy both #1 a bond with a 10% coupon , maturing in 20 years versus #2 a zero coupon maturing in 20 years. Let's say you paid $1,000 to buy #1. #1 will pay you interest every six months, $50, right? Let's say you paid $600 to buy #2. What will #2 pay you along the way? NOTHING! We look to duration to measure the price volatility of the bond as interest rates change. The longer to maturity the more interest rate sensitive, yes?! We can also consider the income created while we own the bond....how long does it take to get back the amount you paid for the bond. With #1, after 10 years you will have received in interest $1,000. The zero coupon, in 10 years, will have paid you nothing. The longer it takes to get back your original investment, the higher the duration. The more interest rate sensitive the bond's market price in the secondary market will be 😀Great question!
Great videos ... very helpful and appreciated. But related to question #5, doesn't duration measure the amount of time necessary for an investor to get back their original investment? Choice C, the zero-coupon bond has a longer duration than B and D, but depending on the terms of the 30 year bond, might that one have a longer duration than the 20 year zero-coupon bond? For example, suppose the 30 year bond had a coupon rate
Hi! Thanks for watching. Yes, I agree, duration does measure the amount of time it takes an investor to get back their original investment. Since a zero coupon bond pays NO interest it ALWAYS wins for longest duration (and most interest rate sensitive). For the test it ALWAYS wins. I do see your point, but for the test ZERO always longest duration. If zero is not a choice, then the longest left to maturity. If all of the maturities are the same, then you would look at the nominal yield. So your logic is all good! Keep up the good work.😀
Are the questions on the actual exam going to look like this? (SIE specifically) I found all of these questions easy to understand and easy to disqualify most of the wrong possible answers. If the test looks like this i am a little less worried. So fingers crossed someone says yes lol
I'm curious how the US government has repayment risk (see #16) since it has never defaulted, is stable politically, and has taxing authority. Is it because it TECHNICALLY has it in the event the sky began to fall?
I do see what you are getting at. But since debt represents borrowing it will always have repayment risk. The issuer is making a promise to pay semi-annual interest and repay the principal at maturity. Whereas, equity would never have repayment risk. Great question. Keep up the good work! 😀
The SIE course has 36 topics. Each topic includes a PDF to read, a video to watch, and a topic quiz. There is a total of 15 hours of lecture videos and over 1,600 practice questions. The study guide is laid out over 4 weeks, with 2-4 hours a day. Can you do the course more quickly? Of course! How many hours you study a day is up to you :) Thanks for watching. Hope to have you as a student soon.
@@PassMasters thank you so much. That helps a lot. Well let me see what my employer is going to do. I would need someone to teach the course and not just give the book and good luck because the wording is very tricky. I will let you know soon.
There is no requirement to complete a prelicensing course for any securities exam. Crazy! But you will want to study a course to ensure you pass the exam on your first attempt! Happy to help with any questions you have Marco 😀
This was SO helpful. Very well explained!
So glad you found it helpful Courtney! Thanks for watching.
@@PassMasters I gave up on Kaplan today after watching your videos and signed up for your course. I love it already!
@@courtneybono6987 So grateful to have you as a student!
Thank you for all the explanations
you're welcome! thank you for watching
watched this to help study for my SIE, also you have a great smile, keep up the good work
Thanks for watching! 😀
Thank you so much for the review
You are so welcome! Thanks for watching! 😀
can you help reexplain how a zero coupon bond has the great duration risk? If it has no interest why is it so volatile to interest rate changes
Consider you buy both #1 a bond with a 10% coupon , maturing in 20 years versus #2 a zero coupon maturing in 20 years. Let's say you paid $1,000 to buy #1. #1 will pay you interest every six months, $50, right? Let's say you paid $600 to buy #2. What will #2 pay you along the way? NOTHING! We look to duration to measure the price volatility of the bond as interest rates change. The longer to maturity the more interest rate sensitive, yes?! We can also consider the income created while we own the bond....how long does it take to get back the amount you paid for the bond. With #1, after 10 years you will have received in interest $1,000. The zero coupon, in 10 years, will have paid you nothing. The longer it takes to get back your original investment, the higher the duration. The more interest rate sensitive the bond's market price in the secondary market will be 😀Great question!
Great videos ... very helpful and appreciated. But related to question #5, doesn't duration measure the amount of time necessary for an investor to get back their original investment? Choice C, the zero-coupon bond has a longer duration than B and D, but depending on the terms of the 30 year bond, might that one have a longer duration than the 20 year zero-coupon bond? For example, suppose the 30 year bond had a coupon rate
Hi! Thanks for watching. Yes, I agree, duration does measure the amount of time it takes an investor to get back their original investment. Since a zero coupon bond pays NO interest it ALWAYS wins for longest duration (and most interest rate sensitive). For the test it ALWAYS wins. I do see your point, but for the test ZERO always longest duration. If zero is not a choice, then the longest left to maturity. If all of the maturities are the same, then you would look at the nominal yield. So your logic is all good! Keep up the good work.😀
Are the questions on the actual exam going to look like this? (SIE specifically) I found all of these questions easy to understand and easy to disqualify most of the wrong possible answers. If the test looks like this i am a little less worried. So fingers crossed someone says yes lol
Thanks 🎉
Thanks for watching 😀
I'm curious how the US government has repayment risk (see #16) since it has never defaulted, is stable politically, and has taxing authority. Is it because it TECHNICALLY has it in the event the sky began to fall?
I do see what you are getting at. But since debt represents borrowing it will always have repayment risk. The issuer is making a promise to pay semi-annual interest and repay the principal at maturity. Whereas, equity would never have repayment risk. Great question. Keep up the good work! 😀
How can I purchase a SIE review?
Just go to our website:
learn.passmasters.com/student/sign-up/step1
Thanks for watching 😀We look forward to having you as a student soon.
Thank you
Glad to help! Thanks for watching :)
For the series SIE, how long is the course? Is it possible for us to cram the lesson? Please help.
The SIE course has 36 topics. Each topic includes a PDF to read, a video to watch, and a topic quiz. There is a total of 15 hours of lecture videos and over 1,600 practice questions. The study guide is laid out over 4 weeks, with 2-4 hours a day. Can you do the course more quickly? Of course! How many hours you study a day is up to you :) Thanks for watching. Hope to have you as a student soon.
@@PassMasters thank you so much. That helps a lot. Well let me see what my employer is going to do. I would need someone to teach the course and not just give the book and good luck because the wording is very tricky. I will let you know soon.
@@magnahomefurniture The course is designed to teach you what you need to know to pass the SIE 🙂Suzy teaches you!
Hi you probably won’t respond but do I need to take a prelicensing course for the SIE?
There is no requirement to complete a prelicensing course for any securities exam. Crazy! But you will want to study a course to ensure you pass the exam on your first attempt! Happy to help with any questions you have Marco 😀
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