As interest rate change, the price of an issued bond also changes. The change in price has an inverse relationship to changes in interest rates (if one rises, the other falls). If new bond issues are paying a higher interest rate than existing bonds, investors will not purchase existing bonds unless:

Question

Quizplus · Accepted Answer

When new bonds offer higher interest rates, existing bonds must be sold at a discount to make them attractive to investors, compensating for their lower interest payments.

As Interest Rate Change, the Price of an Issued Bond