Bond prices and interest rates are inverseley related. Learn about the relationship between bond prices change when interest rates change in this video. If you're seeing this message, it means we're having trouble loading external resources on our website. Whenever the market rate of interest on similar bonds is above a bond's coupon rate, a bond sells at a discount. Premium Bonds. Bond sells above par. Whenever the market rate of interest (YTM) on similar bonds is BELOW a bond's coupon rate, a bond sells at a premium. Bond Prices. When interest rates rise to 3.25 percent in the 10 year maturity area, the price of a bond with a 2.625 percent coupon will be $950 per $1,000 face value bond. If interest rates decline to 1.5 percent, the price will rise to $1,100 per bond in the marketplace. Interest rates and bond prices have an inverse relationship; so when one goes up, the other goes down. The answer is concept of opportunity cost. Investors constantly compare the returns on their current investments to what they could get elsewhere in the market. This has the normal negative slope. As bond prices increase, the quantity of bonds demanded fall. We also know that bond prices and the interest rate are negatively related (for both discount bonds and coupon bonds). Hence the quantity of bonds demanded also has a one-to-one relationship with the interest rate.

## 8 May 2019 Since interest rates and bond prices are inversely related, the risk price. For example, assume the Federal Open Market Committee (FOMC)�

8 May 2019 Since interest rates and bond prices are inversely related, the risk price. For example, assume the Federal Open Market Committee (FOMC)� When the market's required rate of return for a particular bond is much less than bond prior to maturity and interest rates have risen since the bond was purchased, (P0 represents the price of a bond and YTM is the bond's yield to maturity.). This example shows you how and why interest rates and bonds prices move in adjusts to keep the bond competitive in light of current market interest rates. In general, bonds with similar terms will adjust to interest rates in a like manner. Market Interest Rates and Bond Prices. Once a bond is issued the issuing corporation must pay to the bondholders the bond's stated interest for the life of the� More people would buy the bond, which would push the price up until the bond's yield matched the prevailing 3% rate. In this instance, the price of the bond would increase to approximately $970.87.

### Whenever the market rate of interest on similar bonds is above a bond's coupon rate, a bond sells at a discount. Premium Bonds. Bond sells above par. Whenever the market rate of interest (YTM) on similar bonds is BELOW a bond's coupon rate, a bond sells at a premium.

Whenever the market rate of interest on similar bonds is above a bond's coupon rate, a bond sells at a discount. Premium Bonds. Bond sells above par. Whenever the market rate of interest (YTM) on similar bonds is BELOW a bond's coupon rate, a bond sells at a premium. Bond Prices. When interest rates rise to 3.25 percent in the 10 year maturity area, the price of a bond with a 2.625 percent coupon will be $950 per $1,000 face value bond. If interest rates decline to 1.5 percent, the price will rise to $1,100 per bond in the marketplace. Interest rates and bond prices have an inverse relationship; so when one goes up, the other goes down. The answer is concept of opportunity cost. Investors constantly compare the returns on their current investments to what they could get elsewhere in the market.