Reminds me of how bond yields work. If the interest rate guess from 1% to 2% on an existing bond, the bond itself has to lose 50% of its value. I think the potato story is somehow less intuitive.
If a bond has say a one-year term then it won’t lose 50% of its value if interest rates double from 1 to 2 percent because you still get your original full investment back after one year. It’s value instead drops by about 1%.
For a longer term example, a bond purchased for $1,000 and 1% interest rate with 30 years left is worth $776 if interest rates rise to 2%
Source: https://m.free-online-calculator-use.com/bond-value-calculat...
Duration: https://en.wikipedia.org/wiki/Bond_duration Convexity: https://en.wikipedia.org/wiki/Bond_convexity
[1] https://en.wikipedia.org/wiki/File:Potato_paradox.svg
[2] https://bogleheads.org/w/images/thumb/8/84/Bond_-_Premium_-_...
Let's say I have a bond that has a face value of $100, yields 1%, and matures in 1 year. It's value today is $99. Now interest rates go to 2%. That bond is now worth $98, because 1 year from now, at 2% interest, it will be worth $100.
But for longer term bonds (30 years, say), what you said can be true.