For fixed$-$rate bonds it's important to realize that the value of the bond has a$($n$)$

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relationship to the level of interest rates. If interest rates rise, then the value of the bond

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; however, if interest rates fall, then the value of the bond

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$.$ A

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bond is one that sells below its par value. This situation occurs whenever the going rate of interest is above the coupon rate. Over time its value will

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approaching its maturity value at maturity. A

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bond is one that sells above its par value. This situation occurs whenever the going rate of interest is below the coupon rate. Over time its value will

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approaching its maturity value at maturity. A par value bond is one that sells at par; the bond's coupon rate is equal to the going rate of interest. Normally, the coupon rate is set at the going market rate the day a bond is issued so it sells at par initially.