Final answer:
Regarding the interest-rate sensitivity of bonds, the accurate statements are that bond prices and yields are inversely related and that long-term bond prices are more affected by interest rate changes than short-term bond prices. However, the interest-rate risk is inversely related to the bond's coupon rate, and price sensitivity is lower when yield to maturity is higher.
Step-by-step explanation:
When examining the interest-rate sensitivity of bonds, there are several key concepts to understand. The statements I) Bond prices and yields are inversely related, and II) Prices of long-term bonds tend to be more sensitive to interest-rate changes than prices of short-term bonds, are true. However, the statement III) Interest-rate risk is directly related to the bond's coupon rate, is often a misperception. In reality, the interest-rate risk is inverse to the bond’s coupon rate; higher coupon bonds tend to be less sensitive to interest rate changes because they offer higher fixed interest payments. Lastly, IV) The sensitivity of a bond's price to a change in its yield to maturity is inversely related to the yield to maturity at which the bond is currently selling, is false. The price sensitivity is typically lower when the bond's yield to maturity is higher.