Investing Basics – Feel free to ask the most basic questions

Due to an inverse relationship between the Interest rate & bond’s price, a rise in the Interest rate leads to a fall in the Bond’s Price.

Basic relationship –

However, the price fall for a short-term bond is less than the price fall for a long-term bond when interest rates rise.

For instance, comparison between 1-yr and 10-yr bond –

Although both types of bonds lose value on an absolute basis, the short-term bond performs better than a long-term bond as it loses less.