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Scorpio:

Changes in interest rates affect bond prices by influencing the discount rate. Inflation produces higher interest rates, which in turn requires a higher discount rate, thereby decreasing a bond's price. Bonds with a longer maturity see a more drastic lowering in price in this event because, additionally, these bonds face inflation and interest rate risks over a longer period of time, increasing the discount rate needed to value the future cash flows. Meanwhile, falling interest rates cause bond yields to also fall, thereby increasing a bond's price.

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