Question

how the bond is sensitivity to the interest rate movement

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Answer 1

Interest rate sensitivity of the bond is a measure of how much the price of the bond will fluctuate as a result of changes in the interest rate environment of the market.
We can understand Sensitivity as:

• Securities that are more sensitive to interest rates have greater fluctuations in prices than those with less sensitivity to interest rates.

It is important to take into consideration this type of sensitivity during buying a bond as it will decide/affect how much the bond will sell in the secondary market.

Bonds duration: Duration is a measure of the bond's sensitivity.
It is a fact (mathematically proven) that Bonds and interest rates are inversely correlated. Therefore, as interest rates rise, prices of fixed-income securities tend to fall. One way to determine how interest rates affect a fixed-income security's portfolio is to determine the duration.
According to the duration formula, Bond's duration is also inversely proportional to changes in interest rates.
Investors who understand well the concept of duration can immunize their bond portfolios to changes in short-term (and sometimes long-term also) interest rates.

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