Bond duration refers to the remaining life of a bond. A bond's discount or premium will tend to increase as the bond approaches its maturity date. Yield to call is a useful measure for bonds selling at a premium, but not for bonds selling at a discount. The real rate of interest is the risk free rate minus the inflation premium. If a bond's yield to maturity is lower than its coupon rate, the bond will sell at a discount. A downward sloping yield curve (short-term rates are higher than long-term rates) often precedes a recession. The relationship between the rate of return and the time to maturity of similar-risk securities is known as the term structure of interest rates. An increase in interest rates has a negative effect on bond prices and a positive effect on the reinvestment of coupons. With exception of zero coupon bonds, a bond's duration is always shorter than its time to maturity. A significant portion of a coupon bond's total return is derived from the reinvestment of the interest payments. The risk-free rate of return considers the expected rate of inflation. Changes in the inflation rate have a direct and pronounced effect on market interest rates. Predicting the direction of interest rate movements is relatively easy. A bond's current yield is equal to the interest payment divided by par value. A basis point is 1/10 of 1%. The duration of a bond portfolio is the weighted average of the durations of the individual bonds included in the portfolio. A bond has a coupon rate of 6%, matures in 6 years, and currently sells for $1,000 (par value). Therefore the yield to maturity is also 6%