Unit 2 · Level 3 · Rates → assets
Duration is everywhere
Duration isn't only for bonds. A growth stock priced on profits expected in 2035 is a long-duration asset. Crypto, with cash flows somewhere between distant and imaginary, is longer still. That's why 2022's rate shock hit the Nasdaq (about −33%) and speculative tech far harder than boring dividend payers: the further out your value lives, the harder rate gravity pulls.
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What you get asked
A stock whose profits mostly arrive years from now behaves…
Its value is a stack of distant cash flows, so a higher discount rate crushes it. That's the same maths that governs a 30-year bond.
Why did boring dividend payers hold up better than tech in 2022?
Cash arriving soon gets discounted less. A supermarket paying dividends today is short-duration; a pre-profit startup is a 2035 promise.
Match each asset to its rate sensitivity
One ruler measures them all: WHEN does the value arrive? The later the answer, the bigger the swing when rates move.
Near-zero rates made long-duration bets boom in 2020-21; in 2022 the same logic ran in ___.
Cheap money inflated distant promises; expensive money deflated them. Same machine, opposite gear.
The best first question for judging an asset's rate sensitivity:
Timing of value is the hidden variable behind 2022's scoreboard. Ask WHEN before you ask how much. 🐜
The rest of this unit
Interest rates are financial gravity. Trace how one number reaches every asset you own.