AWhen interest rates rise, bond prices rise proportionally
BBond prices and interest rates move in the same direction
CLong-term bonds are less sensitive to interest rate changes than short-term bonds
DWhen interest rates rise, existing bond prices fall
✓ Correct answer: D. When interest rates rise, existing bond prices fallBond prices and interest rates have an inverse relationship. When market rates rise, existing bonds paying lower coupons become less attractive, so their prices fall. Long-term bonds are MORE sensitive (higher duration) to rate changes, not less.
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Theory