What's the difference between coupon rate and yield?

Coupon rate is the fixed interest rate paid on bond's face value (never changes). Yield is your actual return based on price paid. If you buy a $1,000 bond with 5% coupon ($50/year) for $950, your yield is 5.26% ($50 ÷ $950). When bond prices fall, yields rise, and vice versa.

What is yield to maturity (YTM)?

YTM is the total return if you hold the bond until maturity, accounting for coupon payments and price difference between purchase and par value. It's the most comprehensive yield measure. YTM considers current yield plus capital gain/loss at maturity. Higher-quality bonds have lower YTMs but less risk.

Are bonds safer than stocks?

Generally yes, but not risk-free. Bonds have less volatility and more predictable returns. However, bonds carry interest rate risk (prices fall when rates rise), credit risk (issuer default), and inflation risk (fixed payments lose purchasing power). Government bonds are safest; corporate bonds offer higher yields with more risk. Diversify between stocks and bonds.

How do rising interest rates affect bonds?

Bond prices fall when interest rates rise because newer bonds pay higher rates, making existing bonds less attractive. A 1% rate increase typically decreases bond prices by duration amount (5-year duration bond falls ~5%). Long-term bonds are more sensitive to rate changes than short-term bonds. This inverse relationship is fundamental to bond investing.