how would a bond price be affected if factor/s such as interest rate is played with.

Question

Accepted Answer

Bond prices are inversely related to interest rates - when interest rates rise, bond prices fall, and vice versa.

When interest rates rise, newly issued bonds offer higher yields, making existing bonds with lower yields less attractive, causing their prices to decrease.
Conversely, when interest rates fall, newly issued bonds offer lower yields, making existing bonds with higher yields more valuable, causing their prices to increase.
The relationship between bond prices and interest rates is known as the interest rate risk.
For example, if the Federal Reserve raises interest rates, the prices of existing bonds in the market will decrease.
On the other hand, if the Federal Reserve lowers interest rates, the prices of existing bonds will increase.

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