Bond Ladders for Income: Building Rungs, Reinvestment & Cash-Flow Matching

What you'll build

What you will be able to do

Each lab ends with a concrete result that you build yourself and the checker confirms, cell by cell.

• Split $100,000 into equal rungs maturing one year apart, with a rung count you can change, and add up the ladder's annual income.
• Build a year-by-year cash-flow matrix for a 5-rung ladder and split each year's cash into principal returned and coupon income.
• Weight every rung by its dollar amount and compute the ladder's weighted average maturity, weighted yield and annual income with SUMPRODUCT.
• Look up the rate each maturing rung is reinvested at, build the income of every rung year by year and chart how the ladder's income follows falling rates with a delay.
• Work backwards from the last expense to find the face value of the bond to buy for each year, so that coupons plus maturing principal cover every payment, and price the whole portfolio.
• Compare three allocations of the same $100,000 by annual income, average maturity, duration and the value change for a 1% rate rise, all with SUMPRODUCT.
• Build a cumulative price index, deflate a fixed nominal income into today's dollars and compare it with an inflation-linked bond whose principal and coupon rise with prices.
• Estimate how a bond fund and a ladder react to rate changes with duration, add the convexity correction for the fund and find the rate rise that costs the fund one year of income.