create a discussion response to this answer: The relationship between interest rates and bond prices is considered an inverse one because when the interest rate increases the price of the bonds will decrease. $$This will happen because there will be new bonds that will be issued with higher yields to match the new interest rates. $$With this it will be making existing bonds with lower yields minus attractive unless their prices decrease. $$On the other side of it when interest rates decrease the prices of the bonds will then increase. $$The new bonds will have lowers yields making the existing bonds with the higher yields more appealing which will increase prices. $$The relationship between par value and the premium or discount on a newly issued bond is that the par value of the bond is its face value or the amount that will be returned to the bondholder to maturity. $$When a bond is sold at premium will be when it is above par value. $$This will occur about when the bond's coupon rate is higher than the current market interest rates. When a bond is sold at a discount that is when the price is below par value. $$This will happen when the bond's coupon rate is lower that the current market interest rates. $$So why are the new bonds not simply sold at par? $$New bonds are not sold at par always because the market conditions at the time of issuance affect their pricing. $$There are a few factors that come in such as prevailing interest rates, issuer's creditworthiness, and market demand for bonds influence whether a bond was issued a par, premium or discount. $$