Interest rate risk refers to the potential for the value of an investment to fluctuate due to changes in interest rates.
When interest rates rise, the value of fixed-income securities typically decreases, as newer bonds offer higher yields.
Conversely, when interest rates fall, the value of existing bonds tends to increase, as their higher yields become more attractive.
The inverse relationship of interest rates and bond prices is an important consideration for investors, as it can influence portfolio performance and financial outcomes.
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