Bonds versus stocks, feature by feature
| Feature | Bonds | Stocks |
|---|---|---|
| What you own | A loan (you are the lender) | Partial ownership of the company |
| Income | Fixed coupon payments (predictable) | Dividends (optional, variable) |
| Upside | Limited (face value at maturity) | Unlimited (stock can keep rising) |
| Downside | Less likely but severe — a default can wipe out most or all of the loan; the senior claim lowers the odds, not the damage | Total loss possible |
| Priority in bankruptcy | Paid before stockholders | Paid last |
The current-yield formula
Current Yield = Annual Coupon / Bond Price
Explore real bond data in the Ledge
Open the Credit view in the Ledge to explore bond data. Look at how bonds are described by coupon, maturity, and credit rating.
Bonds trade upside for certainty
What rising rates do to a bond you hold
You buy a 10-year bond with a 5% coupon at par ($100). Six months later, market interest rates have risen to 7%. What happens to your bond's market price?
Check your understanding
Sit with the ideas.
You buy a $1,000 bond with a 5% annual coupon. How much interest do you receive each year?
Why:
Try this in paper trading
Buy a bond ETF after the duration lesson
Pick a Treasury or aggregate bond ETF (e.g., IEF, AGG, BND, TLT). Paper-buy 50 shares. Journal what you expect the position to do if the 10-year yield moves up 100 bps versus down 100 bps.
Open paper portfolio →Practice mode — simulated trades, not investment advice.